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TFN or ABN , Which option is good for an IT contractor

Discussion in 'Accounting, Tax & Legal' started by idesi, 1st Aug, 2008.

  1. idesi

    idesi New Member

    Joined:
    18th Jul, 2008
    Posts:
    2
    Location:
    Sydney
    Hello,

    I need some advice form Tax professionals here.

    I am an IT contractor on >120K/a income level. At the moment i am using TFN PAYG service from a contractor management company. Using TFN gives me very less tax returns at the fiscalyear end.

    Now I am thinking about starting my own company by registering an ACN & ABN(like Personal Services Income). Also thinking about some tax efficient investments.

    To proceed with my future investemnt plans which option is best tax effective for me? Shall i continue with my current TFN PAYG or do i get any extra tax benefits if i start my own company. Which option is more beneficial for me ?

    Thanks in Advance
     
  2. MattR

    MattR Well-Known Member

    Joined:
    23rd May, 2007
    Posts:
    229
    Location:
    Sydney
    Well running a company/business and investments are quite different.

    With respect to whether or not you should incorporate for your IT work/contracting there may be some tax benefits available - but these have been severely monitored (some would say hampered) by the PSI Rules - Personal Services Income.

    As a general rule I would be loathe to hold the investments in a company, and especially one that I was operating a business through.
     
  3. DotnetKris

    DotnetKris Member

    Joined:
    22nd Jul, 2008
    Posts:
    18
    Location:
    Canberra
    I am an IT contractor and have been for the past 7 years. Personally I am subject to the Personal Services Income (PSI) legislation as I imagine you would be.

    I have all my affairs managed by Achieve Corp (Welcome to Achieve, Corp.) who i have found to offer a valuable salary package / contractor management service.

    You are employed via one of the management companies that they manage, in return you can have all sorts of expenses salary packaged so that they are deducted from your income pre-tax.

    The most common deductable expenses include motor vehicle and associated costs, mobile phone, internet, investment loan interest, etc.

    I personally don't see any benefit of incorporating or setting yourself up with an ABN as you are still subject to PSI, and hence theres no additional benefit over being employed by the management company.

    Other IT contractor managment companies include Freelance and CXC.

    Do your research and make sure you seek professional advice..

    Regards,
    Kris
     
  4. idesi

    idesi New Member

    Joined:
    18th Jul, 2008
    Posts:
    2
    Location:
    Sydney
    Thanks MattR and Kris for your suggestions.

    I am using CXC salary packaging at the moment.