Employee or Contractor?

WorkerContractor

When you hire a worker, forget the common myth that they’re a contractor simply because they have an ABN.

You need to assess your circumstances, and the working arrangement. It may be an employer/employee arrangement regardless of the fact that they have an ABN and prefer to invoice you for their time.

Your worker could have an ABN for a number of legitimate reasons, but this makes no difference to whether you should treat them as an employee or contractor.

When it comes to tax and super, working out if your worker is an employee or contractor is based on the terms and conditions of their working arrangement with you. Not the fact that they have an ABN.

It’s important to get it right because your tax and super obligations can change based on those arrangements.

If you have a current worker, or intend to employ one in the near future, and want to be sure of the status, give us a call at Cbs on 9598 0100, we can provide an ATO decision: Employee or Contractor?

Anthony Turner FCPA

ATO-Agent

Fuel tax credit rate changes from 1 July 2016

ATO-Agent

On 1 July 2016 fuel tax credit rates for:

  • heavy vehicles that use taxable fuel such as diesel or petrol, and travel on public roads, increased to 13.6 cents per litre due to a decrease in the road user charge
  • biodiesel and fuel ethanol manufactured in Australia changed due to excise duty rates taking effect for biofuels.

You will need to apply the correct rate when you calculate the fuel tax credit claim on your client’s business activity statements.

Fuel tax credit rates are indexed twice a year in line with the consumer price index. This occurs in February and August.

Rates as follows:

Liquid fuels

All rates are in cents per litre unless otherwise stated.

Table 1: Fuel tax credit rates for liquid fuels acquired from 1 July 2016
Business use Eligible liquid fuel Rate for fuel acquired from 1 Jul 2016
In a heavy vehicle* (including emergency vehicles) for travelling on public roads Liquid fuels – for example, diesel or petrol

13.6**

All other business uses – such as on private roads, off public roads and non-fuel uses Liquid fuels – for example, diesel*** or petrol

39.5

To power auxiliary equipment of a heavy vehicle* travelling on public roads – such as fuel used to power a refrigeration unit or a concrete mixing barrel Liquid fuels – for example, diesel*** or petrol

39.5

Packaging fuels in containers of 20 litres or less for uses other than in an internal combustion engine Mineral turpentine, white spirit, kerosene and certain other fuels

39.5

Supply of fuel for domestic heating Heating oil and kerosene

39.5

Notes to table 1

* A heavy vehicle is a vehicle with a gross vehicle mass (GVM) greater than 4.5 tonnes. Diesel vehicles acquired before 1 July 2006 can equal 4.5 tonnes.

** This rate accounts for the road user charge (which is subject to change) and applies to fuel used in a heavy vehicle for travelling on public roads. From 1 July 2016, the road user charge exceeds the rate of duty paid for biodiesel (B100), so there is no fuel tax credit entitlement for B100.

*** From 1 July 2016, the fuel tax credit rate for biodiesel (B100) is 1.3 cents per litre.

 

Gaseous fuels

All rates in cents per litre unless otherwise stated.

Table 2: Fuel tax credit rates for gaseous fuels acquired from 1 July 2016
Business use Eligible gaseous fuel Rate for fuel acquired from 1 Jul 2016
In a heavy vehicle* (including emergency vehicles) for travelling on public roads Duty paid LPG, LNG or CNG – transport

0.0**

All other business uses – such as on private roads, off public roads and non-fuel uses Duty paid LPG – transport

12.9

Duty paid LNG or CNG – transport

27.0 cents/kg

LPG, LNG or CNG – non-transport

0.0

To power auxiliary equipment of a heavy vehicle*travelling on public roads – such as fuel used to power a refrigeration unit or a concrete mixing barrel Duty paid LPG – transport

12.9

Duty paid LNG or CNG – transport

27.0 cents/kg

Supplying LPG:

  • by filling cylinders of 210kg capacity or less for non-transport use
  • in tanks for residential use

 

Duty paid LPG – transport

12.9

LPG – non-transport

0.00

Notes to table 2

* A heavy vehicle is a vehicle with a gross vehicle mass (GVM) greater than 4.5 tonnes. Diesel vehicles acquired before 1 July 2006 can equal 4.5 tonnes.

** This rate accounts for the road user charge (which is subject to change) and applies to fuel used in a heavy vehicle for travelling on public roads. The road user charge currently exceeds the rate of duty paid for gaseous fuels.

 

Blended fuels

From 1 July 2016, excise duty rates apply for biodiesel and ethanol. This will affect fuel tax credits for Fuel blends

All rates in cents per litre unless otherwise stated.

Table 3: Fuel tax credit rates for standard fuel blends acquired from 1 July 2016
Business use Eligible blended fuel Rate for fuel acquired from 1 Jul 2016
In a heavy vehicle* (including emergency vehicles) for travelling on public roads B5 (5% biodiesel / 95% diesel)

13.6**

B20 (20% biodiesel / 80% diesel)

13.6**

E10 (10% ethanol / 90% petrol)

13.6**

E85 (85% ethanol / 15% petrol)

0.0**

All other business uses – such as on private roads, off public roads and non-fuel uses*** B5

39.5

B20

39.5

E10

39.5

E85

8.135

To power auxiliary equipment of a heavy vehicle*travelling on public roads – such as fuel used to power a refrigeration unit or a concrete mixing barrel B5

39.5

B20

39.5

E10

39.5

E85

8.135

Notes to table 3

* A heavy vehicle is a vehicle with a gross vehicle mass (GVM) greater than 4.5 tonnes. Diesel vehicles acquired before 1 July 2006 can equal 4.5 tonnes.

** This rate accounts for the road user charge (which is subject to change) and applies to fuel used in a heavy vehicle for travelling on public roads. The road user charge currently exceeds the rate for E85.

*** Does not include packaging fuels in containers of 20 litres or less.

 

Cbs2

 

Instant $20,000 write-off for small business

ATO-Agent

Author: Steven Wang ASA

 

You can choose to use simplified depreciation rules if you have a small business with an aggregated turnover of less than $2 million.

Under these simpler rules, you:

  • claim an immediate deduction for most depreciating assets that cost less than $20,000 each that was acquired and installed ready for use from 7.30pm (AEST) on 12 May 2015 until the end of 30 June 2017. The rule applies to second-hand assets as well.
  • pool most other depreciating assets into a general small business asset pool and:
    • claim a 15% deduction in the first year (regardless of when you purchased or acquired them during the year)
    • claim a diminishing value rate of 30% deduction on the opening pool balance each year after the first year (regardless of their effective life)
  • deduct the balance of your general small business pool at the end of an income year if the balance of the pool (prior to calculating the depreciation deduction) at the end of the year is less than $20,000.

Aggregated annual turnover means the total normal sales of your business and that of any associated businesses.

Examples of depreciating assets you can’t apply the simpler depreciation rules:

  • assets you rent or lease, or are expected to be leased out, to others for more than 50% of the time on a depreciating asset lease
  • assets allocated to a low-value pool
  • horticultural plants, including grapevines
  • in-house software where development expenditure is allocated to a software development pool
  • capital works
  • research and development.

Examples of depreciating assets you can apply the simpler depreciation rules to include but not limited to:

  • IT hardware such as desktop computers, printers, scanners and photocopiers in an office
  • Furniture and fittings in a cafe
  • Display screens, air conditioners and kitchen equipment
  • Work vehicles, even second-hand
  • Tradesmen’s tools and machinery
  • Plant and equipment
  • Sheds or storage containers for storing equipment.

Double-edged sword:

The immediate deduction essentially accelerates depreciation by bringing future deductions to current financial year, but it doesn’t give anything extra.

Many small businesses are not companies. This means they are eventually taxed under marginal individual tax rates. In some scenarios, the tax payers are actually worse off to receive a chunk of deduction in one financial year instead of receiving small deductions for a series of years.

Think deductions as discounts. The discount rate depends on the marginal tax rate a tax payer is on. The higher marginal tax rate a tax payer is on, the more discount the deduction gives. However, a chunk of deduction may bring a tax payer down to a lower marginal tax rate, which makes the deduction applied on the lower marginal tax rate less effective.

The instant write-off is not a cure-all for every small business. Before you rush to take advantage of the instant write-off, hold your horse and talk to us at Cbs Complete Business Services first.

 

by Steven Wang ASA

Accountant – Cbs Complete Business Services

Cbs2

Small Business Tax Discount

ATO-Agent

Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount. The discount will be five percent of the income tax payable on the business income received from an unincorporated small business entity.

The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset.
The start date for this measure is the 2015–16 income year.

So…

From the 2015–16 income year, an individual is entitled to a tax offset on the tax payable on the portion of their income that is from:

-net small business income from sole trading activities, and/or
-share of net small business income from a partnership or trust.

The income tax offset can reduce the tax payable that relates to the individual’s small business income by 5% up to $1,000 each year.
We will work out the offset based on the total net small business income reported in your income tax return.

Good for micros!!

Cbs2

Company tax rate reduction

Are you aware that from 1 July 2015 a new two-tier company tax system took effect and applies to all companies? This system applies the whole of a company’s taxable income to the following company tax rates:

  • 28.5% if the company’s aggregated turnover is below a $2 million threshold (i.e. a small business entity)
  • 30% if the company’s aggregated turnover is equal to or above a $2 million threshold.

Companies don’t need to do anything now. If identified as a small business, the new rate would have been automatically applied to the PAYG instalments rate or on the activity statements.

Where a small business has a late balancing substituted account period (SAP), their PAYG instalments will be adjusted from their first 2015–16 instalment period. For early balancing SAPs, the reduced rate will not apply until their 2016–17 income year.

MV Expense Claims to be Simplified

In the 2015-16 Federal Budget, the government announced that it will simplify the car expense deductions for individuals. Under current arrangements, there are four methods for claiming car expenses:

  • Cents per kilometre – capped at 5,000kms
  • Logbook – unlimited kms
  • 12% of original value
  • One-third of actual expenses

From 1 July 2015 the government will abolish the one-third of actual expenses method and 12% of original value method. The cents per kilometre method (with the existing 5,000km cap) and the logbook method (with unlimited kms) will remain.

The cents per kilometre method will be simplified to use a standard rate of 66 cents per km rather than a rate based on the engine size of the car.

Legislation and supporting material

Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015External Link was introduced into Parliament on 15 October 2015.

See also: