Home – New Forums Starting your journey Working as IT contractor – Need Advice

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  • #995779
    lokapedia
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    Hi All,

    I am an IT professional. I have been working as a Permanent Full Time Employee since I got graduated and now very first time I have been offered a role on contract bases.

    The new Job is a 6 months contract and the recruitment agency will be paying me on daily rates + GST.

    I have been asked by my recruitment agency to secure following documents before they can pay me

    1. Set up a Company
    2. Get Professional Indemnity insurance
    3. Get Public Liability Insurance
    4. Get Workers Comp Insurance.

    So I have done all of the above things and getting paid in my personal account. But I have following questions.

    1. Do I have to open a company bank account or can I continue to get paid in my personal account?
    2. If I open a bank account under my company name. Do I have to anything else after I get paid in that account? (Like pay my self as an employee?)
    3. Can I claim expenses like computer/software purchases and daily car parking, fuel etc?

    Thank you in advance :)

    #1203866
    Peter – FS Administrator
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    Hi Lokapedia,
    Thanks for joining Flying Solo and getting involved.
    Congratulations on the contract. Specific deductions may be something you’d need to clarify with your accountant, but some of our resident finance members might have some advice for you on this.
    Cheers,
    Peter

    #1203867
    Mischelle
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    Hi Lokapedia,

    Firstly welcome to the forums, you will get lots of information on here.

    My first questions is about the structure of your business, the recruitment agency is asking for a “Company” you need to clarify with them if it has to be a Company Pty Ltd or can you operate as a Sole Trader.

    That answer will impact your banking and payroll requirements.

    I suggest getting an accountant ASAP to help with all of this and confirming the structure first.

    Insurances are pretty straight forward, but PI Insurance can cost a lot of money, so be ready for that one and remember to factor in those costs into your daily rate.

    Depending on what you are doing will impact your PI Insurance, you will need to complete a proposal form to detail the work you are doing or you can go for a packaged deal.

    Packaged deals – IE Insurance House have pre-packaged, but you MUST fit in with their policies.
    Custom Insurance Proposals – I think the guy on this forum is [USER=78993]@Delphic[/USER] he will be able to help you with your insurances.

    Post if you have more information or questions.
    Cheers

    Mischelle :)

    #1203868
    Taxopia
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    lokapedia, post: 241983, member: 88427 wrote:
    Hi All,

    I am an IT professional. I have been working as a Permanent Full Time Employee since I got graduated and now very first time I have been offered a role on contract bases.

    The new Job is a 6 months contract and the recruitment agency will be paying me on daily rates + GST.

    I have been asked by my recruitment agency to secure following documents before they can pay me

    1. Set up a Company
    2. Get Professional Indemnity insurance
    3. Get Public Liability Insurance
    4. Get Workers Comp Insurance.

    So I have done all of the above things and getting paid in my personal account. But I have following questions.

    1. Do I have to open a company bank account or can I continue to get paid in my personal account?
    2. If I open a bank account under my company name. Do I have to anything else after I get paid in that account? (Like pay my self as an employee?)
    3. Can I claim expenses like computer/software purchases and daily car parking, fuel etc?

    Thank you in advance :)

    It’s pretty common to hear businesses requiring their contractors to incorporate and use a company structure. It basically alleviates their exposure to PAYG withholding obligations and super obligations.

    So if you start a company you should have the funds deposited into a company bank account as this will be the primary method of managing the accounting records each quarter / year. The company will need to maintain a proper set of accounting records being a general ledger that produces a balance sheet and profit and loss statement. Relatively simple for a consulting company like yours. The company is required to comply with Division 7A of the tax legislation which means any assets removed from the company balance sheet (including cash) will effect your loan account and its tax management. So if the monies go straight into a personal account then it will all be treated as drawings from a loan perspective.

    There are several options for withdrawing the profits but the first step is to determine if the PSI regulations will apply. If they do then then income will be attributed out to your personal return and accounted for using a special method in the company.

    Some expenses can be claimed but again it depends on whether the company passes or fails the PSI tests.

    We can help with all of this. Feel free to call.

    Cheers
    Alex

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