Setting up as Sole trader - questions
Apr 30th 2007, 10:08 pm
#16
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Thread Starter
Joined: May 2006
Posts: 64
Re: Setting up as Sole trader - questions
Thank you all for your replies!
Where can I find more information regerding above information (is this the "80/20 rule"?) and the implications on tax?
I'm looking at, for the first 3-6 months, invoice one single company in Sweden for software development services (full-time). I am a bit confused - does this mean I will NOT pay tax according to the 'Resident Individuals' tax levels (http://www.ato.gov.au/businesses/con....htm&page=6&H6) as a sole trader, but rather as a company (30% according to ATO website, and no tax-free threshold or marginal tax rates) or other?
I will not have any employees (so I guess I'm looking at paying the minimum fee of $120/year för Worker Comp).
Thanks,
Andy
Originally Posted by Exile
If you do all your work for one client and have no employees doing principal work, I think you may fall into the personal services income trap, which means you get taxed as if you were an employee of a company, not at the corporate tax rate.
The unusual ratio is a max of 80% for one client. You can however get exemptions if it's a contract and that's your normal business method.
You would have to show the ATO an employment contract with a termination date to get this past them.
My understanding though is that he is simply an international home based employee. He may be able to get them to vary his employment terms to say subcontractor.
You would have to show the ATO an employment contract with a termination date to get this past them.
My understanding though is that he is simply an international home based employee. He may be able to get them to vary his employment terms to say subcontractor.
I'm looking at, for the first 3-6 months, invoice one single company in Sweden for software development services (full-time). I am a bit confused - does this mean I will NOT pay tax according to the 'Resident Individuals' tax levels (http://www.ato.gov.au/businesses/con....htm&page=6&H6) as a sole trader, but rather as a company (30% according to ATO website, and no tax-free threshold or marginal tax rates) or other?
I will not have any employees (so I guess I'm looking at paying the minimum fee of $120/year för Worker Comp).
Thanks,
Andy
Apr 30th 2007, 10:27 pm
#17
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Joined: Jul 2005
Posts: 936
Re: Setting up as Sole trader - questions
I can't remember exactly as it's a while since I went through all this.
I think you'd pay less tax (in some cases substantially less, but I think the difference has narrowed as personal tax rates have declined in recent years) if you register as a company, as long as the the personal service rule doesn't apply.
I think the rule normally applies to people working for one client on an ongoing basis, and with no employees doing principal work (ie, you can't employ your wife/husband in a role as bookkeeper or teamaker, etc, to split the income). If its just for 3-6 months, I don't think the rule will affect you.
Have a search on the ATO website for anything to do with "personal services income".
Sorry to be a bit vague. It's all a bit blurry these days.
I think you'd pay less tax (in some cases substantially less, but I think the difference has narrowed as personal tax rates have declined in recent years) if you register as a company, as long as the the personal service rule doesn't apply.
I think the rule normally applies to people working for one client on an ongoing basis, and with no employees doing principal work (ie, you can't employ your wife/husband in a role as bookkeeper or teamaker, etc, to split the income). If its just for 3-6 months, I don't think the rule will affect you.
Have a search on the ATO website for anything to do with "personal services income".
Sorry to be a bit vague. It's all a bit blurry these days.
Thank you all for your replies!
Where can I find more information regerding above information (is this the "80/20 rule"?) and the implications on tax?
I'm looking at, for the first 3-6 months, invoice one single company in Sweden for software development services (full-time). I am a bit confused - does this mean I will NOT pay tax according to the 'Resident Individuals' tax levels (http://www.ato.gov.au/businesses/con....htm&page=6&H6) as a sole trader, but rather as a company (30% according to ATO website, and no tax-free threshold or marginal tax rates) or other?
I will not have any employees (so I guess I'm looking at paying the minimum fee of $120/year för Worker Comp).
Thanks,
Andy
Where can I find more information regerding above information (is this the "80/20 rule"?) and the implications on tax?
I'm looking at, for the first 3-6 months, invoice one single company in Sweden for software development services (full-time). I am a bit confused - does this mean I will NOT pay tax according to the 'Resident Individuals' tax levels (http://www.ato.gov.au/businesses/con....htm&page=6&H6) as a sole trader, but rather as a company (30% according to ATO website, and no tax-free threshold or marginal tax rates) or other?
I will not have any employees (so I guess I'm looking at paying the minimum fee of $120/year för Worker Comp).
Thanks,
Andy
