Alienation of personal services income:
important information for contractors and consultants -
booklet
This booklet is designed to help you understand the changes
to the tax law for contractors and consultants and whether
they affect you. (NAT 4788)
Activity statement Businesses use an activity
statement to report and pay their PAYG (instalments and
withholding), FBT instalments, GST and related tax obligations
and to pay deferred company and superannuation fund instalments
Capital gains tax is the tax you pay
on any capital gain you make and include on your annual
income tax return. There is no separate tax on capital gains,
it is merely a component of your income tax. You are taxed
on your net capital gain at your marginal tax rate.
Capital allowance (depreciation) measures
are found in Division 42 of the Income Tax Assessment Act
1997 (ITAA 1997) and contain the rules for calculating depreciation
deductions for plant. They operate until 30 June 2001 only.
The plant depreciation measures have been replaced, with
effect from 1 July 2001, by the Uniform Capital Allowance
system (UCA). The UCA contains a general set of rules
that apply to most depreciating assets and is found in
Division 40 of the ITAA 1997.
cash accounting method that recognises
most business income and expenses only when received and
paid
Contract workers are those workers who
are self employed and have a contract with you to provide
services. The information in the table below will help you
determine if your workers are contract workers
Dividend imputation has been a major
feature of the Australian taxation system since 1987. Entities
that are taxed separately from their members are called
corporate tax entities, and they are taxed at the company
tax rate, which is currently 30%.
Employees : are those workers you employ
in your business. You generally have to withhold tax from
payments you make to them. The information in the table
below will help you determine if your workers are employees
Medicare is the scheme which gives Australian
residents access to health care.
Medicare levy surcharge (MLS)
Individuals and families on higher incomes, who do not have
private patient hospital cover for themselves and all of
their dependants (including their spouse if they have one),
may be liable to pay MLS for any period during the income
year that they did not have this cover.
MLS is in addition to the 1.5% Medicare levy.
Personal services income essentials
Personal services income, defined as a reward for, or the
result of, your personal efforts or skills, can affect tax
obligations for contractors and consultants.
Reportable Fringe Benefits Your employer
is required to record the taxable value of certain fringe
benefits provided to you. Where the total taxable value
of those fringe benefits exceeds $1000 in a FBT year, your
employer will be required to report an amount on your payment
summary.
Salary sacrifice arrangement is an arrangement
between the employer and the employee, where the employee
agrees to forego part of their future entitlement to salary
or wages in return for the employer providing benefits of
a similar cost to the employer. The employee is likely to
place greater value on the benefit than its cost to the
employer
simplified trading stock rules where
businesses only need to conduct stocktakes and account for
changes in the value of trading stock in limited circumstances,
and
simplified depreciation rules where depreciating
assets costing less than $1,000 each are written off immediately.
Most other depreciating assets are pooled and deducted at
a rate of 30%.
Simplified tax system
The STS is an alternative method of determining taxable
income for eligible small business with straightforward
financial affairs.
TFN is a unique number issued by the
Tax Office.
Taxable Australian government pensions
The following taxable Commonwealth of Australia government
pensions and allowances are included in assessable income:
age pension
age service pension
bereavement allowance
carer payment
disability support pension, if you have reached age pension
age
income support supplement
invalidity service pension, if you have reached age pension
age
parenting payment (single)
partner service pension
widow B pension
wife pension
The Australian Business Register (ABR)
is the central collection, storage and verification system
for basic business identity information from all entitiles
with an ABN. This documents gives a definition of the ABR.
