Business Losses
If a business that makes a loss, you can carry forward that loss and may be able to claim a deduction for it in a future year. The rules differ for different business structures. If you’re a sole trader or a partner in a partnership, you may be able to claim business losses by offsetting
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Read More »Residency – The Superannuation Test
The superannuation test is the third statutory test. This test covers current Commonwealth government employees and states that you are an Australian resident if you are: a member of the superannuation scheme established under the Superannuation Act 1990, or an ‘eligible employee’ for the purposes of the Superannuation Act 1976. If you are an Australian
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Read More »The 183 Day Test – Residency
What is the 183 day rule? This is the second statutory test. Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that: • your usual place of
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Read More »Residency Test – The Domicile Test
The domicile test is the first statutory test. You are an Australian resident if your domicile is in Australia, unless we are satisfied that your permanent place of abode is outside Australia. If in Australia, you are considered an Australian resident for income tax purposes. What is a domicile? Your domicile is the place that
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Read More »Making Sure SMSF Are Still Resident
The ATO has put out an information paper entitled “Check the residency of your fund” with a descriptive case study. The following are excerpts: To be a complying super fund and receive tax concession, an SMSF needs to be a resident regulated super fund at all times during the income year. This means a fund
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Read More »Running Your Business From Home
The following information applies where your home is also your principal place of business – that is, you run your business from home, and a room is set aside exclusively for business activities. Examples include: . a small business operator whose main office is in their home • a tradesperson or craftsperson who has their
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Read More »Small Business Concession Case Update
Instant asset write-off by 31 December 2013 John bought a commercial oven for $6,499.99 to go in his new cafe. He installed it on 31 December 2013, and use it solely for business purposes. From 1 July- 31 December 2013, small business can claim an instant asset write-off for most assets that cost less the
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Read More »Loss? – A Tax Loss or A Capital Loss?
A tax loss is different from a capital loss. While a tax loss arises out of your income and deductions for the year (that is, current account transactions), a capital loss may occur, for example, when you dispose of a capital asset for less than its tax value. A capital loss can only be offset
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Read More »Small Business CGT concessions
There are four small business CGT concessions. Small business 15-year exemption If your business has owned an asset for 15 years and you are aged 55 years or over and are retiring, or if you are permanently incapacitated, you won’t have an assessable capital gain when you sell the asset. Small business 50% active asset
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Read More »SMSF – Insurance for members and Restrictions on investments
When preparing your investment strategy you’re required to consider whether to hold insurance cover for each member of your SMSF. Your SMSF can generally provide insurance for a member for an event that is consistent with one of these conditions of release of the member’s superannuation benefits: • death • terminal medical condition • permanent
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Read More »Claiming GST credits
You can claim a credit for any GST included in the price of any goods and services you buy for your business. This is called a GST credit (or an input tax credit – a credit for the tax included in the price of your business inputs). When you can claim a GST credit You
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Read More »Rental Property Deductions
You can claim expenses relating to your rental property but only for the period your property was rented or available for rent; for example, advertised for rent. Expenses could include: • advertising for tenants • bank charges • body corporate fees and charges • borrowing expenses • capital works • cleaning • council rates •
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Read More »Claiming Tax Losses From Previous Years
If your business made tax losses in previous years, you can carry forward those losses. You can also claim a deduction for those losses in a later year. However, sole traders and individual partners in a partnership are subject to the non-commercial loss rules. When you carry forward tax losses, all of the following apply:
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Read More »Deduction for Business – What You Can Claim And When
You can claim a deduction for most expenses you incur in running your business as long as they are directly related to earning your assessable income. Generally, working or operating expenses (such as office stationery and wages) can be claimed in the year you incur them. However, capital expenses (such as buying plant and equipment)
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Read More »SuperStream
SuperStream is a government reform aimed at improving the efficiency of the superannuation system. Under SuperStream, employers must make super contributions on behalf of their employees by submitting data and payments electronically in accordance with the SuperStram standard. Broadly, the SupeStream standard specifies the minimum requirement for dealing with payment and information relating to employer
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Read More »Interpretative Decisions ID 2014/17 – FBT Redemption of Voucher By A Retail Store Employee
When a retail store employer provides an employee with a voucher/coupon, entitling the employee to merchandise form a participating retail store of the employer, the employer has not yet provided the employee with an ‘in-house property fringe benefit’. Facts The employer operates retail stores and provides the employee with a voucher/coupon at regular intervals during
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Read More »Net Medical Expenses Tax Offset Phase-out
Net Medical Expenses Tax Offset Phase-out The net medical expenses tax offset is being phased out from 1 July 2013. To be eligible for the offset this year, your clients must have received the offset in their 2012–13 income tax assessment. Similarly, those who receive the tax offset in their 2013–14 income tax assessment will
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Read More »Tax Update
Dividend Washing Dividend washing occurs when shareholders seek to claim two sets of franking credits on what is effectively the same parcel of shares. The Proposed new integrity rule is intended to: apply from 1 July 2013 • be inserted into the Income Tax Assessment Act 1997 • be activated to the extent that an
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Read More »Instant asset write-off and simplified depreciation and SMSF – Be Prepared For New Penalty Powers
The government announced changes to the instant asset write-off previsions for small business. The changes are expected to come into effect from 1 January 2014. From the 2012-13 income year small businesses have been able to write-off depreciating assets costing less than $6,500 in the income year in which they start to use the asset,
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Read More »TD2014/7 – SMSF And Segregating Bank Accounts
This determination asks and answers the question “in what circumstances is a bank account of a complying superannuation fund a segregated current pension asset under S.295-385 of the ITAA 1997?” Income derived by a superannuation fund from segregated pension assets is exempt from tax – refer S.295-385 of the ITAA 1997. An asset is a
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Read More »New Initiative To Resolve Tax Dispute
The ATO has announced an in-house facilitation process for tax agents and their clients to resolve tax disputes. Tax agents and their clients will now be able to use this service in aduits and objections involving indirect tax, small business and individual taxpayers, and private groups and high wealth individuals. In-house facilitation aims to: •
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Read More »Repairs And Maintenance To A Rental Property Previously Used As A Home
There has been an increasing tendency for home owners to use an existing home as a rental property, especially where a new home has been purchased. In these situations, it is common for taxpayers to undertake repairs and maintenance to their existing home in order to make it more attractive to prospective tenants before the
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Read More »2014/15 Budget (main points C)
3.1 New schedule for increasing the Superannuation Guarantee (‘SG’) The government will change the schedules for increasing the SG rate from 9.25% rate to 12%, to provide business with certainty, as follows: • Instead of pausing the SG rate at 9.25% (as previously announced0, the SG rate will increase from 9.25% to 9.5% from 1
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Read More »2014/15 Budget (main points B)
2.3 Abolishing the Mature Age Worker Tax Offset From 1 July 2014, the government will abolish the MAWTO. Currently, the MAWTO is only available in respect of a resident individual who was born before 1 July 1957 and who has an amount of net income from working of less the $63,000 for an income year.
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Read More »2014/15 Budget (main points A)
1. Changes effective 1 July 2013 (i.e., 2013/14 income year) 1.1 Medicare levy low income thresholds For 2013/14, the Medicare levy low income thresholds will be as follows: Individuals $20,542 (no increase from 2012/13) Families $34,367 (previously $33,693) The families income threshold (i.e., $34,367 will be increased by $3,156 (previously $3,094) for each dependent child
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Read More »Minimum Pension Payment Requirements & The Work Test & Making Contributions
The finalisation of TR2013/5, Income tax: when a superannuation income stream commences and ceases, generated much discussion in the media and industry on the ATO’s view that a pension cease when a fund does not pay the required annual minimum pension amount. The ATO subsequently considered circumstances that warrant granting an exception that would allow
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Read More »When A Superannuation Income Stream Ceases
A superannuation income stream ceases when there is no longer a member who is entitled, or a dependant beneficiary of a member who is automatically entitled, to be paid a superannuation income stream benefit from a superannuation interest that supports a superannuation income stream. When a superannuation income stream ceases is determined by reference to
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Read More »When A Pension Commences and Ceases
This Ruling explains when a ‘superannuation income stream’ (i.e., pension) commences and when it cease, and consequently when a superannuation income stream is payable. These concepts are relevant to determine the income tax consequences for both the superannuation fund (including the availability of the pension exemption) and the member in relation to superannuation income stream
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Read More »GST and Termination of HP Agreement
An adjustment arises for GST purposes when a financier exercises its right to terminate a hire purchase (HP) agreement due to a default by the hirer and the outstanding instalment are no longer payable. Facts A financier enters into a HP agreement with a customer (the hirer) for the supply of goods on or after
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Read More »When Changing From Cash to Accruals, CGT on Receipts
Where a taxpayer’s method of accounting from a cash to an accruals basis in an income year, the taxpayer may make a capital gain when they receive payment for the provision of services carried out in the previous income year. S. 118-20 will not apply to reduce the capital gain because no amount of the
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Read More »Keeping Money and Other Assets Separate – SMSF
An SMSF must open and maintain its own bank account, as it is required to keep its assets and money separate from that of other entities. Facts The trustees of the SMSF are members of a family. The fund has a standard employer-sponsor and all the trustees work for the standard employer-sponsor in various capacities.
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Read More »Your Super Contribution Caps And Your Age
If you are under 50 years old, for financial year 2013-14 concessional cap is $25,000 Contributions caps For the 2014-15 financial year, the concessional cap for individuals who are 49 years old or over on 30 June 2014 is $35,000. There is 15% tax payable by your fund on concessional (before-tax) contributions paid into a
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Read More »SMSF and Tax
SMSF is subject to income tax but receive concessional treatment if they are complying funds. A complying SMSF taxable income is generally taxed at a rate of 15%, compared with 45% for a non-complying fund. The most common types of assessable income for complying SMSF is: • assessable contributions • interest, dividends and rent •
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Read More »Newly Registered SMSF Annual Return Due on 28 February 2014
The ATO has issued a reminder the 2013 SMSF annual return for new registrants is due on 28 February 2014. The help clients to prepare for lodgement, the ATO recommends letting clients know the audit report needs to be completed so that their SMSF annual return can be lodged on time. Please note newly registered
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Read More »Selling or Closing Your Small Business
There are a number of tax issues you may need to deal with if you: • stop operating your small business • sell the business • wind up your company • register a business but don’t actually start the business These may include: • cancelling your ABN and other registrations • lodging and paying any
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Read More »Super Obligation Of Employee And Contractor
Your tax and super obligations are different depending on whether your worker is an employee or a contractor. Employees work in your business and are part of your business. Contractors run their own business and provide services to your business. Just because a worker has an ABN does not mean they will be a contractor
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Read More »Salary Sacrifice Arrangements For Employees
As an employee, you need to be aware of how entering into a salary sacrifice arrangement with your employer will affect you: you pay income tax on the reduced salary or wages your employer may be liable to pay FBT on the non-cash benefits provided salary sacrificed superannuation contributions are classified as employer superannuation contributions
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Read More »Salary Sacrifice Arrangements For Employees
What is a salary sacrifice arrangement? A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer providing them with
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Read More »Advice For Successful Small Business
Professional advice Small businesses seek the advice of qualified professionals, such as accountants, on a regular basis. Independent professional advice can be very useful in assisting businesses improve their strategic direction and their business management practices, and hence better position businesses for growth. Marketing It is important that businesses have a marketing strategy to achieve
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Read More »Fringe Benefits Tax Exempt Benefit
A number of benefits are exempt from fringe benefits tax (FBT). Exempt benefits are not only exempt from FBT, they are also (with one exception) exempt from income tax in the hands of the employee to whom you (the employer) provide them. Car Benefit There are circumstances in which private use of a car may
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Read More »Tips To Avoid Exceeding The Contributions Caps
As we know there is tax liability if there an excess contributions, and the followings are tips to avoid exceeding the contribution caps: For Non-Concessional Contributions • Fully understand what your non-concessional contributions cap. • Keep a clear bookkeeping record of the amount of contributions and when they were received by your super fund. •
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Read More »Newly Registered Self-Managed Superannuation Funds
Tax returns for newly registered SMSFs are due for lodgement by: 31 October 2013 for SMSFs who prepare their own return 25 February 2014 for SMSFs who are tax agent clients An SMSF is not legally established until the fund has assets set aside for the benefit of members. ATO will not process nil returns,
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Read More »Company Loss Carry-Back
The loss carry-back law provides a company with the choice to carry back all or part of a tax loss from an income year, or the previous income year, against their income tax liability in either of the two previous income years. This allows companies experiencing tax losses to carry these losses back against the
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Read More »How SMSF Property Investment Is Taxed
Property is an popular investment because it generates income and also, if you invest wisely, a capital gain as the property increase in value over the years. Purchase investment property through SMSF gives you access to significant tax concessions on rental income and capital gains on the profit when investment sold. SMSF income taxed depends
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Read More »What You Can and Can’t Acquire Property Through SMSF
Some people are still having confusion about what property a SMSF can invest in and which are “no-go” zone. Rule 1, SMSF can’t invest in SMSF is prohibited from buying residential property from fund members or from people, companies or trust they are ‘associated’ with. Purchases must be made at arm’s length. Two people would
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Read More »Rules 3 and 4 for Minimising Bad Debts
Rule 3. Extending credit to another company involves risk. Of course, in most case, the risk is part of the cost of doing business and it is acceptable… so long as it is managed properly. Even if you were not able to apply any of the other rules to your business, we urge you to
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Read More »Rules for Minimising Bad Debts
Rule1, He who expects to get paid, gets paid In the administration and control of receivables, attitude counts. We have discovered that if you expect to get paid and the other party knows it and knows you will take action if you are not paid, you will get paid. It’s simple, if you take it
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Read More »Anti-Detriment Payments
The anti-detriment provisions provide a great planning strategy to all superannuation funds, where a member dies. Generally, if the legislative requirements are met, they allow a superannuation fund to pay an additional amount to the deceased member’s dependants, on top of any death benefits sourced from the member’s account, representing the amount of contributions tax
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Read More »Common Errors When Utilising Tax Losses
Some common mistakes that clients may make when using their tax losses: • incorrect classification of the loss on either revenue or capital account; • losses being used where a company doesn’t satisfy either the continuity of ownership (COT) and the control test, or the same business test (SBT); • records not being kept to
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Read More »Appointing An Approved SMSF Auditor
SMSF trustees should appoint an approved SMSF auditor for each income year to perform a financial and compliance audit of their SMSF’s operations before they lodge their sel-managed superannuation fund annual return. Approved SMSF auditor must: • be registered as approved SMSF auditors with the Australian Securities & Investments Commission (ASIC), and • have an
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Read More »Changes on Capital Gains Tax Discount For Foreign Resident Individuals
The CGT discount was available to foreign resident individual on taxable Australian property. What has changed? From 8 May 2012, foreign or temporary resident individuals must meet certain eligibility conditions to apply the CGT discount. It depends on: • whether the CGT asset was held before or after 8 May 2012, and • the residency
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Read More »SMSF – Segregation of Pension Assets
The ATO has recently released a draft taxation determination – TD 2013/D7 – setting out their views on what a super fund needs to do to segregate its pension assets and, therefore, ensure that income from those assets is exempt from tax, without the need to obtain an actuarial certificate. Although it is only a
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Read More »Depreciation deductions for jointly owned rental assets
If a renal property is jointly owned, each joint owner can claim an immediate write-off where their interest in a renal property depreciating asset is $300 or less*(under S.40-80(02) of the ITAA 1997, assuming the other conditions are met), even if the overall cost of an asset exceeds $300. (*) Under S.40-80(02), depreciating assets costing
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Read More »Get Rid of Mixed Use Loans
Situation may arise where use a loan facility to borrow money for income-producing purpose (e.g., the acquisition of a rental property) but the client then draws further money (e.g., using a redraw facility) for private purposes. If this occurs, the loan account becomes a ‘mixed purpose account’, and the interest will cease to be 100%
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Read More »Super Fund Keep Pension Exemption After Death
The government has made amendments to “provide tax certainty for deceased estates in situations where a person has died while in receipt of a superannuation income stream”. Broadly, a superannuation fund is entitled to a tax exemption for income that supports the payment of superannuation income stream benefits (i.e., superannuation pensions). The term ‘superannuation income
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Read More »Common errors when applying CGT concessions
Some common errors occurring when applying the small business CGT concessions, and has offered tips to avoid those errors. Correctly report earn-out arrangements The sale of a business often includes a clause for further payments to be made due to future earnings. otherwise referred to as earn-out rights. Earn-out rights must be included in the
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Read More »New rules affecting SMSF trustees from 1 July 2013
SMSF trustees should be made aware of the following changes that are intended to apply from 1 July 2013: • the ATO will have the power to issue administrative penalties against SMSF trustees (and directors of corporate trustees); • the ATO will have the power to issue relevant persons with a direction to rectify specified
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Read More »Simpler depreciation rules for small business
Small businesses with turnover of less than $2 million that the depreciation rules for business assets are now simpler from the 2012/13 income year onwards. Assets costing less than $6,500 The small business instant asst write-off threshold has increased from $1,000 to $6,500 allowing small business to immediately write-off most new depreciating assets costing less
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Read More »New Changes
CHANGES EFFECTIVE 1 JULY 2013 Superannuation – higher concessional contributions cap • From 1 July 2013, people aged 60 or more will be able to access the higher $35,000 concessional contributions cap; and • From 1 July 2014, people aged 50 or more will be able to access the higher $35,000 concessional contribution cap. Phasing
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Read More »ATO New Taxble Payment Reporting – From 1 July 2012
ATO new taxable payment reporting – building and construction industry from 1 July 2012 Business in the building and construction industry is required to report the total payment they make to each contractor for building and construction services each year. Your business is considered to be a business that is primarily in the building and
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Read More »Personal Service Income Rules (the “PSI” rules)
There are many professionals have ‘personal services income’ from their activities, and these ‘personal services income may be subject to the personal service income (‘PSI’) rules. These rules can apply to professional, no matter whether they are operating as a sole trader or through a personal services entity (‘PSE’), like partnership, company or trust. We
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Read More »Superannuation Contributions
Concessional (or deductible) contributions caps A ‘concessional contribution’ is basically a super contribution which is assessable in the fund. Generally speaking, contributors can claim tax deductions, including an employer contribution and a self-employed contribution. Concessional contributions cap in 2012-13 financial year is $25,000. Exceed the $25,000 cap remain tax deductible, however are taxed at an
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Read More »New Depreciation Rules
New changes from 2012-13 onwards: The small business instant asset write-off threshold has increased from $1,000 to $6,500; small business can claim initial deduction for motor vehicles purchased in 2013 financial year and onwards the deduction $5,000 plus 15% of the remaining amount; the long life small business pool and the general pool have been
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Read More »Tax-Effective Structure For Trades People
Consideration for setting up a tax-effective structure for tradespeople When choosing a tax-effective structure for tradespeople, it is important to make sure whether there are any rules and regulations governing the industry which may limit the choice of structure to be used. Common structure of how a trades person may work include: A plumber may
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Read More »Changes To Super You Need To Know
Several important changes to super were announced by the Government, but not all have been legislated as yet. The Superannuation Guarantee(SG) rate will progressively increase from 1 July 2013. The current SG rate of 9% will continue to apply in 2012/13, increase to 9.25% in 2013/14 and rise progressively to 12% by 2019/20. The SG
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