In today's newsletter we make strong recommendations for you to review your tax minimisation arrangements. The ATO is on the hunt and has an amnesty in place till the 30 April. The risks apply to those arrangements that involve trusts and the splitting of incomes between beneficiaries, typically the spouse. So do read on as this is important.
The CEO of Entity Solutions, Matthew Franceschini, comments on the fact that the freelance business is growing rapidly in market acceptance with latest research indicating that by 2030 the majority of Australian workers will be working as freelancers.
We have provided an excellent case study of a small business that has used the australiafreelancemarket.com.au service and comments on the benefits received. They saved themselves a lot of money, but more importantly, have developed a long term relationship for ongoing development... lovely stuff.
Under our free software section we also introduce you to mailchimp.com an email service provider who for 'zero' cost can help you to promote your service more effectively.
Lastly, but definitely not least, I would like to offer my apologies for the typographic errors prevalent in the March newsletter. As the old saying goes 'If it can go wrong, it will go wrong'; proved itself true.
I would like to wish you a busy and successful month ahead.
Beware of Labour-hire firms and recruitment agencies offering tax minimisation schemes which promote splitting income between workers and their spouses in order to minimise tax.
Hundreds of taxpayers and dozens of employers who are using trusts to pay contractors and consultants have until April 30 to contact the Tax Office before it investigates companies and taxpayers involved with the schemes. 'I'm concerned that people involved in this arrangement may be unaware of the risk that it may be ineffective under the taxation laws and the superannuation guarantee provisions,' tax commissioner Michael D'Ascenzo said. 'We are concerned that individuals may enter into these arrangements to reduce tax liabilities by splitting their income with an associate and that the arrangement may not satisfy the personal services income tests and that the anti-avoidance provisions could possibly apply,' he said. The Tax Office has promised a reduction in penalties that might apply if taxpayers come forward.
The tax schemes recently uncovered by the Tax Office involve a firm, usually a labour-hire or contract management firm, offering a remuneration to individuals, including high-end executives and IT workers, which involves paying them via a trust associated with the labour-hire firm. The trust then pays the individual and one of the person's beneficiaries, who is usually a spouse. Instead of being paid a straight wage with the usual employer obligations such as withholding tax, superannuation and workers' compensation, the labour-hire firm splits the income between the worker and his or her spouse, which minimises the couple's income tax bill.
The clients of labour-hire firms that use these types of trusts can also expect attention from the Tax Office. CPA Australia policy director Paul Drum said the Tax Office warning was unusual because many taxpayers might not realise they had broken tax laws and companies that encouraged their contractors to use the trusts could be inadvertently in breach of serious promoter penalty laws.
Mr. Drum said wage earners had been trying to split their income with their spouses since the 1980s but the practice had largely been stamped out by the Tax Office in the 1990s.
Independent Contractors Australia executive director Ken Phillips was aware of such trust arrangements. He said he was not surprised the ATO had raised questions about such transactions.
The ATO also warned that labour hire firms, recruitment agencies and their clients might not be withholding the right amount of tax or paying the correct superannuation to contractors working for them.
'The ATO is reviewing these [labour-hire] arrangements and will be writing to entities advising them about our concerns that they may risk contravening tax laws,' Mr D'Ascenzo said. The Tax Office applies a number of tests to determine whether contractors and consultants are earning personal-services income or a wage. These include having no one client generate more than 80 per cent of a contractor's income and obtaining work through advertising the contractor's firm, not as a result of placing their name with a recruitment agency. For more information on the 80% rule go click here.
Australia's contract/freelance workers are a satisfied bunch, making the most of the freedom, flexible hours and variety that their work choice offers. New research has revealed that despite a tough business environment during the GFC, contractors remained upbeat, confident and content with their choice of lifestyle with the number of contractors entering the workforce continuing to rise.
Speaking at the launch of the IPro Index 2010 study, Matthew Franceschini, CEO of Entity Solutions, said that these independent professionals currently make up 20 per cent of the workforce. He predicted that this figure would continue to rise due to the attractive benefits that come with contracting for both the worker and employer, claiming that the majority of the workforce will be contractors by 2030.
I run a small business in Sydney and have been doing so since 2004. I felt that my website was starting to look a bit old and tired and needed some modernisation to bring it up to date and represent my business in a more professional manner.
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I'm now a happy owner of a new website and saved myself a fortune on its development. This successful project was only made possible because freelance-market introduced us. BTW, the freelancer and I are now working on phase 2 ... and tomorrow the world!
As freelance consultants and business owners we are constantly looking for ways to promote our services. Using high quality email promotion to recipients who have asked to be on your mailing list is one very effective mechanism to achieve this objective. Unfortunately, the delivery of this service can actually be expensive and difficult to manage as it is almost impossible to co-ordinate from your personal email service.
Typically therefore a provider is used to facilitate the delivery and manage the individual campaigns. For some good tips on how to prepare a quality email campaign click here and go to Web Chameleon who provide some excellent homespun advice on the how's and wherefore's. The email service provider that I came across was www.mailchimp.com.au. I'm very impressed and really like their service model. Essentially they are targeting a volume market and allow you to use the service for free if you register under 2000 subscribers and email less than 12,000 shots a month. That's a lot of emails and excellent promotion of your business.
www.australiafreelancemarket.com.au, Postal address: 49 Frenchs Forest Rd, Frenchs Forest NSW 2086, Australia
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AustraliaFreelanceMarket.com.au is a on-line contractor marketing portal for professional freelancers facilitating direct contracts between the contractor and client. Skills available include management consultants, security advisors, IT professionals, business analysts, marketing consultants, graphic artists and administration personnel.
Benefits for clients and contractors:
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• Client costs are reduced in that they are not paying the 10-40% agent fee.
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• Searches and Introductions are free to the client
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• Contractors incur only a small fee per introduction based on their hourly rate
• High quality contractor database to choose from
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