Tax Give Me a Break!

Tax cuts and other ways to catch a break

Who doesn’t want a break –a luxury holiday would be sensational. But for business owners operating in our current challenging environment, a cut in taxes, fees and other charges and avoiding unnecessary penalties might actually be better than a holiday. Here’s a roundup of the good news with statutory and other government updates and tips on how you can catch a break.

Catch a Break on Payroll Tax

Are you one of the estimated 40,000 businesses that caught a break courtesy of the NSW State Government budget? In the 2018-19 state budget handed down in June 2018, the NSW Government announced a break on payroll tax for small business.

The New South Wales Treasurer, Mr Dominic Perrottet, announced that from 1 July 2018, the tax-free threshold for payroll tax will increase from $750,000 to $850,000. It will continue to increase by $50,000 every year to reach $1m in 2021/22. The threshold will be $850,000 in 2018/19, $900,000 in 2019/20, $950,000 in 2020/21 and $1m in 2021/22.

“Businesses that consistently have payrolls over $1 million will save more than $120,000 over the next decade from the lifting of the payroll tax threshold, which is money that can be reinvested back into businesses,” the state’s treasurer, Dominic Perrottet, said in a pre-budget announcement.

It’s estimated that around 40,000 businesses will benefit from the change, saving up to $5,450 next financial year and up to $13,625 by the 2022 financial year. Up to 5,000 businesses will eventually not have to pay payroll tax at all. But before you plan what you’ll do with your savings, you’re advised to first ensure that you have your payroll tax house in order.

Managing the Detail

Peter Tobin of Tobin Partners Lawyers, a firm specializing in indirect taxes and payroll tax, said that while the changes will benefit many businesses, payroll tax is a complex tax with many details which need to be accurately handled.

“Payroll tax is described as a ‘self-assessed’ tax, but we see many businesses making critical errors in administering payroll tax themselves,” Peter said. “Currently, payroll tax on management fees as distinct from directors’ fees is an issue under the spotlight of authorities and one which affects many small businesses.”

Peter explained that while most businesses knew that payroll tax was payable on directors’ fees, many were unaware that it may also apply to management fees payable between companies.

“We’ve handled a number of cases recently where family companies paid management fees from one company to another,” Peter explained. “With common directors, it was convenient for the director’s family company to receive income as management fees from the business company rather than director’s fees.”

The business owners were aware that ‘director’s fees’ were subject to payroll tax, but not aware that the management fees fell under the definition of contractor and as such were also subject to payroll tax.

“Fortunately in this case, as their payroll tax lawyer, we were able to demonstrate to the regulator that the management fees were entitled to an exemption under the contractor provisions,” Peter said.

Peter Tobin strongly advises businesses that operate with contractor payments to be across their understanding of the exemptions in regard to payroll tax and how they handle management fees to directors and directors’ fees.

“Also under the magnifying glass by Office of State Revenue in each State, are the practitioner agreements in medical and health clinics,” Peter said. “We have been following a recent case in Victoria involving The Optical Superstore and their optometrists, which may have an impact across many businesses in the medical and health professions.”

Warning, the penalties for payroll tax breaches are significant, so could be worth you seeking more information at www.revenue.nsw.gov.au or www.tobinpartners.com.au 

Contractor v Employee

Catch a break on avoiding potential penalties, backpayments, cost of legal action and a whole load of stress by accurately classifying every individual in your workforce as either a contractor or an employee.

The Fair Work Ombudsman has reportedly said this is a major issue and is in agreement with the Australian Tax Office that it is an area that requires greater clarity for business. A recent high profile case involving a food delivery company highlighted the issue and brought it well and truly into the spotlight.

If you engage workers on a contract basis, you would be well advised to check the rulings and ensure you are handling this accurately, both in regard to PAYG, payroll tax and other entitlements. Check www.ato.gov.au for guidance

Fees, Fails and Findings

You’ve no doubt kept an eye on the Banking Royal Commission – hard to avoid when it’s dominating the news. But what are you taking out of the findings?

We’re dependent on banks for transactional purposes, but when it comes to borrowings, you could catch a break by looking at other options.

When most small businesses require finance for new equipment, computer systems, vehicles, etc they head straight to their bank to arrange commercial leasing, CHP or overdraft.

Other options? Finance broker. Most businesses engage a broker for vehicle and similar purchases but don’t realize that they can also arrange finance for other business purposes.

Brokers claim to offer greater independence, can source from a larger pool of commercial loan options and get you better interest rates and more flexible repayment terms on many business expenses.

So catch yourself a break on finance by talking to a finance broker. Refer to our Supplier Directory for contacts.

Easing Equity Crowdfunding

Capital raising just got easier for many small businesses, with the Senate passing the Corporations Amendment (Crowd-sourced funding for proprietary companies) Bill in September.

For the detail, head to the Australian Government Legislation webpage and for specifics in relation to your business, speak with your accountant or finance expert. But in a nutshell…this amendment extends the 2017 legislation and now allows proprietary companies to raise equity via crowdfunding without having to change their corporate structure to an unlisted public company.

Those ‘in the know’ say this is a huge advantage for small business, and could be a way for you to catch a break in having greater freedom to raise capital for specific developments and growth in your business.

Regional Support

We wouldn’t want to lose our valued Macarthur businesses to other areas, but if you are considering a tree change for your business, the NSW Government recently announced an incentive package to encourage businesses to relocate to specific regional areas. The NSW Government Investment Attraction Package includes financial incentives, relocation packages, interest-free loans and a concierge service to assist you through the process. For more info head to www.industry.nsw.gov.au/invest-in-nsw/why-sydney-and-nsw/regional-nsw

More on the Horizon

We’ll stay across what’s on offer for small businesses in future issues but as we prepare this story, the NSW Government has announced a discussion paper to abolish licensing fees for some trade licenses. So tradies – watch this space to catch a break!

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Lyndall Lee Arnold
Differentiated by a rare combination of natural creative talent and business sensibility, Lyndall is an experienced writer who effectively puts together words to explain, sell, train, excite, inspire, motivate, explain, entertain and communicate. Writing for the page, the screen, the mic, she infuses every project with her insight, instinct and initiative. As a small business owner/operator, she identifies closely with Smarter Macarthur readers and as editor, explores issues and starts conversations beyond the expected. Delivering valuable and useful resources and information in every issue to build our readers’ knowledge base and increase their business productivity. Based on a strong foundation as a creative spirit, writer, producer and project manager, Lyndall has developed a wealth of experience and expertise across the full spectrum of marketing and communications services in an even broader range of industry sectors. Her contemporary, conversational writing style is perfect for websites and marketing campaigns, but she excels at varying her style to suit the product and the audience - from quirky and creative, to ‘straight to the point’ business through to classic and formal speak for grants and awards. In an interesting and varied career, Lyndall has proven her capability to transform business ideas and aspirations into practical, workable reality with her common sense approach and conscientious attitude.

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