How the ‘gig economy’ has changed work and the economy.

How the ‘gig economy’ has changed work and the economy.

Firstly, you’re probably wondering what this whole “gig economy” means.  It’s actually a buzz phrase, first coined at the height of the financial crisis when a number of workers started ‘gigging’ and working many casual jobs to stay afloat financially. Today, it is more recognised with people freelancing who are seeking more flexible and diversified work and working hours especially within the rapidly growing digital platforms.   These platforms allow freelancers to directly connect with potential employers to find employment.  Hence the term ‘gig workers”.  Great examples of these digital platforms are companies such as Uber, Airtasker and Deliveroo who are changing  traditional markets.

With this growing trend legislation also needs to be updated to reflect these abovementioned changes and it has, but it has been slow. Internationally, we have seen disagreement over gig workers classifications as either ‘employees’ or ‘independent contractors’. The most recent ruling by Australia’s Fair Work Ombudsman in June 2019 found Uber drivers to be independent contractors because there is not “an obligation for an employee to perform work when it is demanded by the employer”, as reported by Stuart Ridley.

A survey commissioned by the Victorian government published in June 2019, found 7.1% of Australians reportedly used a digital platform such as Airtasker (34.8%), Uber (22.7%), Freelancer (11.8%), Uber Eats (10.8%), Deliveroo (8.2%) for work. This report further found 64.8% of gig economy workers to access work via one platform opposed to 35.2% who accessed work through more than one platform and 11.4% who are registered on four or more platforms.

This however has forced changed to be made in the definition of work reviewing the definition of ‘casual’ work to ensure legislation applies to capture gig workers under workplace health and safety, improve superannuation rights and ensure protection under Australia’s industrial relations system. Simona Scattagalia Cartago says, “Getting a real measure of this global phenomenon is not easy, especially when some may underestimate its true size by considering only gig work as a primary source of income. In the US, more than 35% of the workforce seems to be participating in the gig economy, and that number is expected to jump to 43% by 2020.”

This however is also causing issues regarding superannuation. The Association of Superannuation Funds of Australia (ASFA) noted almost a quarter of self-employed people to have no super and less likely to meet the $450 per month earning threshold with any one employer as recorded in February 2018. It has been suggested a new ‘dependant contractor’ category to be made, ditching the earning threshold.

Further taxation issues have arisen from this new gig economy with the Australian Tax Office (ATO) updating guidelines for people earning income via digital platforms to also include ride sharing, short-term property or room rentals or skills on demand, as changed in June 2019. The ATO warn they will be matching data earnings from such above-mentioned platforms.

If you want to know more about how to navigate through these gig economy changes, please get in touch with the team via email or phone us 02 9415 1511. Speak soon!

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Important changes to land tax and stamp duty surcharges.

Important changes to land tax and stamp duty surcharges.

The NSW Government has recently proposed new laws to target discretionary trusts that currently own or intend to own NSW property, either directly or indirectly via other entities (i.e. unit trusts, companies and partnerships, subject to some exclusions).  The new laws will mean that discretionary trusts may be treated as ‘foreign persons’ with the following consequences:

  • A land tax surcharge of 2% (in addition to the normal land tax); and
  • A stamp duty surcharge of 8% (in addition to the normal stamp payable on NSW property acquisitions).

To prevent this from happening, your trust deed must be amended so that it includes provisions that specifically exclude foreign persons as trust beneficiaries.  If your trust already holds NSW property and has paid either of the above surcharges, then you only have until 31 December 2019 to amend the trust deed to obtain a refund on surcharges paid.

Please contact our office to discuss the matter further.

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Don’t let your Christmas generosity cause unwanted tax for your business

Don’t let your Christmas generosity cause unwanted tax for your business

When celebrating Christmas with your staff in the form of Christmas parties or gifts, be sure to keep accurate record as certain scenarios may attract Fringe Benefit Tax (FBT). Since 1986, the FBT system has existed in order to tax on things on the fringe, as the name suggests or outside of your salary package.

There is no separate FBT for the Festive Season however you may encounter several different circumstances when providing these events to your staff. This could also include fringe benefits provided by you to past and future employees and their associates (spouses and children), an associate or those under an arrangement with a third part to any current employees.

Implications for taxpaying body

If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following scenarios may help you determine whether there are FBT implications arising from a Christmas party;

Implications for tax-exempt body

If you are a tax-exempted organisation the following situations may be relevant in determining the possible FBT implications arising from a Christmas party.

Understanding the Fringe Benefits Tax implications can be confusing and for a merrier Christmas your awareness of FBT and having accurate record keeping is important. Before planning your Christmas party, staff and client gifts please call us for advice.

If you any questions and what to know more please get in touch 02 9515 1511 or email us reception@primeadvisory.com.au.

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An Easy Way To Work Out What Tax Cuts You Can Expect

An Easy Way To Work Out What Tax Cuts You Can Expect

As widely reported, the Australian Parliament recently passed a bill to cut taxes which will apply to the tax return you are about to file or just have for the 2018/19 financial year. Depending on what your taxable income is for the year just gone, with the tax cuts you can expect a refund of up to $1,080.  If you’ve already submitted your tax return, fear not, you’ll still get the promised tax refund based on your earnings.

You can reference a detailed yet easy to understand explanation (including a handy calculator) in a recent article by The Guardian Australia which details how much you will receive now based on your individual income. Even more importantly, it also calculates what you can expect over the coming years.

Work out what your tax cut looks like for you.

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EOFY Reminders For Business Owners – Annual Tax Returns

EOFY Reminders For Business Owners – Annual Tax Returns

Another financial year is about to finish!  As a business owner, there are many obligations that you need to consider and action just before and after 30 June.

Some of these will help to minimise your tax.  Others will reduce your exposure to an ATO tax audit.  We have outlined these action points below to assist you.

Please carefully consider this information and contact us immediately if you have any questions we can answer or if there is anything we can assist you with.

Pre 30 June 2019

Trusts: Trustee resolutions need to be in place to be able to distribute trust income for the 2019 financial year to beneficiaries.

Companies: Review shareholder loan accounts and make minimum loan repayments (may need to declare dividends).

Payment of superannuation by 25 June 2019 should have been made to deduct contributions in the current financial year.

Complete a stocktake where required.

Write off bad debts and scrap any obsolete stock or plant and equipment.

Ensure any inter-entity management fees have been raised.

1 July 2019

Single touch payroll is compulsory for all employers. Standard business reporting-enabled software must be used to report payments such as salaries and wages, PAYG withholding and superannuation information.

Taxable payments annual reporting extended to businesses providing road freight, information technology, security, investigation and surveillance services.

14 July 2019 (on or before)

PAYG Payment Summaries provided to all of your staff – or Single Touch Payroll Finalisation Declaration needs to be made by 31 July 2019.

28 July 2019

Quarterly super guarantee payment due (1 April – 30 June 2019).

31 July 2019

Single Touch Payroll Finalisation Declaration needs to be made.

14 August 2019

Annual PAYG Payment Summary to be lodged with the ATO if applicable (not required if you have lodged a Single Touch Payroll Finalisation Declaration). Penalties apply for late lodgement.

28 August 2019

Taxable payments annual report due for the building and construction industry, cleaning and courier service industries.

Key changes you need to be aware of

SINGLE TOUCH PAYROLL NOW REQUIRED FOR ALL EMPLOYERS

All employers are now required to use Single Touch Payroll (STP) from 1 July 2019.

STP is the direct reporting to the ATO of salary and wages, PAYG withholding and superannuation contributions.

Employers with 20 or more employees have been required to use STP since 1 July 2018.  Please note that the ATO has provided a small amount of leniency to smaller employers for a limited period of time.

There are a number of low cost or even free software payroll options for micro employers (1 to 4 employees).

The ATO has also stated that businesses with 20 employees or less can initially lodge STP in a quarterly BAS lodged by a registered Tax Agent.

NO TAX DEDUCTIONS IF YOU DON’T MEET YOUR TAX OBLIGATIONS

From 1 July 2019, if taxpayers don’t meet their PAYG withholding and reporting obligations to the ATO, they will not be able to claim a tax deduction for payments:

    • of salary, wages, commissions, bonuses or allowances to an employee;
    • of Director’s fees;
    • to a religious practitioner;
    • under a labour hire arrangement; or
    • made for services where the supplier does not provide an ABN.

If you make a mistake and voluntarily correct it before the ATO begins a review or audit, a deduction may still be available but penalties may still apply for failure to withhold the correct amount of tax.

PAYMENTS TO CONTRACTORS

From 1 July 2019, security providers and investigation services, road freight transport, and computer system design and related services businesses will need to collect specific information about payments made to contractors (individual payments and totals for the year).  A Taxable Payments Annual Report will need to be lodged with the ATO by 28 August 2020.

Businesses that operate in the building and construction industry, cleaning and courier services will need to report their payments to contractors for the year ended 30 June 2019 by 28 August 2019 to the ATO.

Your 2019 EOFY Reminders & Action Items

PAYG PAYMENT SUMMARIES

If you have not used STP for 2019, then you need to provide all of your employees with their PAYG Payment Summary on or before 14 July 2019.  This includes any employees that left your employment during the 2019 financial year.

The ATO imposes penalties for the late lodgement of PAYG Payment Summary Statements.  The annual PAYG Payment Summary Statement for the year ending 30 June 2019 needs to be lodged with the ATO on or before 14 August 2019. However, if we are preparing your Payment Summary for you and you only employ family members in your business (closely held employees), you may be eligible for an extension.

REPORTABLE FRINGE BENEFITS ON PAYG PAYMENT SUMMARIES

Where you have provided fringe benefits to your employees in excess of $2,000, you need to report the FBT grossed-up amount on their PAYG Payment Summary.  This is referred to as a `Reportable Fringe Benefit’ (RFB) amount and a label is included on the PAYG Payment Summary for this purpose.

STOCKTAKE

Businesses that buy and sell stock generally need to do a stocktake at the end of each financial year as the increase or decrease in the value of stock is included when calculating the taxable income of your business.

If your business has an aggregated turnover below $10 million, you can use the simplified trading stock rules.  Under these rules, you can choose not to conduct a stocktake for tax purposes if the difference in value between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year is less than $5,000.  You will need to record how you determined the value of trading stock on hand.

If you do need to complete a stocktake, you can choose one of three methods to value trading stock:

    • Cost price – all costs connected with the stock including freight, customs duty, and if manufacturing, labour and materials, plus a portion of fixed and variable factory overheads, etc.
    • Market selling value – the current value of the stock you sell in the normal course of business (but not at a reduced value when you are forced to sell it).
    • Replacement value – the price of a substantially similar replacement item in a normal market on the last day of the income year.

A different basis can be chosen for each class of stock or for individual items within a particular class of stock.  This provides an opportunity to minimise the trading stock adjustment at year-end.  There is no need to use the same method every year; you can choose the most tax effective option each year.  The most obvious example is where the stock can be valued below its purchase price because of market conditions or damage that has occurred to the stock.  This should give rise to a deduction even though the loss has not yet been incurred.

TRUST DISTRIBUTION RESOLUTIONS

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest.  Decisions made by the trustees should be documented in writing, preferably by 30 June 2019.

If valid resolutions are not in place by 30 June 2019, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

ACTION STEP: If you haven’t already signed your Trust Distribution Resolution, please contact our office before 30 June 2019 so that we can properly prepare this document for you to sign.

PAYROLL TAX

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

    • fringe benefits based on the grossed-up taxable value of fringe benefits;
    • all employer contributions to superannuation on behalf of employees; and
    • some contractor or sub-contractor fees.

For more detailed information about whether payroll tax applies to your business, please contact our office.

ACTION STEP: The Annual Return/Reconciliation for payroll tax must be lodged by 22 July 2019 with your State Revenue Office.

WORKCOVER / WORKSAFE

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

    • fringe benefits based on the taxable value of fringe benefits (do not gross-up);
    • all employer contributions to superannuation on behalf of employees; and
    • some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

ACTION STEP: Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

GOODS AND SERVICES TAX (GST)

A reconciliation of GST should be performed as at 30 June 2019 to determine if there has been an under or over-payment of GST in the 2019 tax year.  If a discrepancy has arisen, then it is possible to adjust a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

ACTION STEP: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

ATO AUDIT ACTIVITY

Please note that the ATO and State Revenue Office are constantly increasing their audit activities.  There has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We can offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

ACTION STEP: Please contact our office if you would like to request this service.

Last Minute Tax Minimisation Tips

Here’s a few final reminders about ways to reduce your tax for 2019:

    1.  Write-off Bad Debts.
    2.  Write-off any trading stock that is damaged or obsolete.
    3.  Review your Asset Register and scrap any obsolete plant and equipment
    4.  Pay for marketing materials, repairs, consumables, office stationery, and   donations before 30 June 2019.
    5.  Ensure employee superannuation contributions are made (and received by   your employees’ superannuation fund/s) by 30 June 2019 to allow a tax   deduction this financial year.
    6.  Realise any capital losses you have before 30 June 2019 to offset against any   capital gains you may have made.

WANT TO TALK?

Feel free to contact our office anytime  – We can’t wait to provide you with better advice to help you stay on-track.

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