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Tax advice please for a contractor

Discussion in 'Accounting, Tax & Legal' started by perrycomo, 15th Apr, 2010.

  1. perrycomo

    perrycomo Member

    Joined:
    12th Sep, 2009
    Posts:
    10
    Location:
    nsw
    Hi there,
    Hypothetical:
    If i have a fulltime job as say a busdriver but work on the weekends driving a truck for another business

    The weekend job owner pays me as a contractor and doesn't want to know about my tax affairs

    So does this mean to keep things above board I should have a abn,set up a business, claim deductions etc

    Or can I keep it simple and just tackon say $ 2000 to my salary when I see the tax agent at the years end

    If I take the second route does that mean the weekend busness owner has to show a group certificate or any other paperwork

    Sorry if I've confused anybody Thanks
     
  2. MattR

    MattR Well-Known Member

    Joined:
    23rd May, 2007
    Posts:
    229
    Location:
    Sydney
    Very Basically...


    Weekend work - yes you should have an ABN and if you don't provide it they should be withholding 46.5% from each payment.

    Otherwise you will be an employee with all that entails.
     
  3. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    Even if you have an ABN, if it is simply a second 'job' the company you drive for cannot simply escape their obligations.

    I would also suggest you would struggle to even be issued with an ABN as the ATO is tightening up on who can have an ABN - especially individuals. They are no longer issuing them to everyone who applies. And they will call to confirm what 'business' you will be undertaking.

    There are also PSI (Personal Services Income) consequences - please refer to the previous thread about PSI here: http://www.invested.com.au/4/personal-services-income-37493/

    You potential 'employer' cannot simply make you get an ABN and then ignore all their obligations in regards to:

    - PAYG withholding tax
    - Superannuation guarantee contributions (SGC)
    - Workcover
    - Payroll tax (if applicable)
    - Other industrial relations laws that protect you

    I would do it on the books or not at all.

    I have seen a lot of people who have 'contracted' under an ABN who have been screwed over - they thought they were getting a good deal due to a higher rate of pay compared to an employee, but after taking into account their large (unexpected) end of year tax bill and no super contributions and virtually no rights.....you get the picture.

    Another option you have if you are only planning on doing it short-term and don't mind making an enemy is to do it under an ABN, get the extra money in the hand (negotiate hard in terms of the extra amount you should get for making it easier for him), put away some for your end of year tax (say 20% - 20% is a good rule of thumb) and quit when you are ready and report the business to the ATO for non-payment of superannuation.

    If all things work out, you will get the higher rate of pay plus 9% super on top of it! :eek:

    Whatever you decide please be careful!

    SM
     
  4. GregR

    GregR Reid Consultants

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    13th Jul, 2009
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    Location:
    Berwick Vic
    If you are simply being paid cash, one option (not necessarily the correct or legal option) is to regard it as a hobby and not declare or be part of the black economy.
    If the owner does not want to do anything other than pay cash, you have a choice to work or not.

    An issue to consider may be the legal liability if you have an accident driving for him, whose cost?

    Be careful of the choices you make and understand the risks.
    Greg
     
  5. MattR

    MattR Well-Known Member

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    229
    Location:
    Sydney
    Good replies SuperMan and GregR:D
     
  6. perrycomo

    perrycomo Member

    Joined:
    12th Sep, 2009
    Posts:
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    Location:
    nsw
    Brilliant thanks for the replies
    I'm leaning towards starting a business

    A couple more questions . Do I have to pay a provisional tax?

    Is there any issues with starting a business like say flower arranging or parcel delivery but also receiving income streams contracting as a computer repairer?
    A mixed business that's cool right?
     
  7. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    You can do different businesses and have different income streams. Just beware you need to split up your income streams (income and related expenses) when you lodge your tax return (you will have multiple business schedules).

    You will only have provisional tax (PAYG instalments) if you have tax payable of more than $500 when you lodge your tax return. Maybe put some cash away if you are worried about a big tax bill.

    SM