IT contracting vs perme in Sydney
 

I'm currently contracting in the Uk & I'm trying to work out what to do when we move to Sydney....there seems to be mixed messages.
A majority seem to be suggesting that it's not worth contracting due to 80/20 rules & rates being lower than they are here ...resulting in lots more stress for not much more money = it's not worth it.
But on the other hand, there are contractors out there, so how are they making it work???

Re: IT contracting vs perme in Sydney
 

I looked into contracting in Brisbane when we first got here - mainly just to get my name about and get a bit of short-term cash in. I didn't think the hourly rate was anything flash but I got talking to a few of the other guys and they were saying that the tax laws in particular make up for the lower rate. You can claim tax refunds for every bloody thing here if you know what you're doing - or know someone who does ;)

I have no idea about the Sydney market though .... I did get work through a Sydney based agency - JAV IT.

Re: IT contracting vs perme in Sydney
 

What about the 80/20 rule? I've heard that some just ignore it & hope they're not audited...or are you saying that people contract on a PAYE basis but through an agency & the tax write offs still make it worth while?

Re: IT contracting vs perme in Sydney
 

Well, I'm contracting in IT in Brisbane, the rates are comparable to UK.

Can I be the first to ask, whats the 80/20 rule :blink:

(I concentrate on work, not pay, thats my excuse for being clueless on tax, rules etc :p )

Re: IT contracting vs perme in Sydney
 

I have no idea either, which is why I ignored that part :o

Re: IT contracting vs perme in Sydney
 

I have no idea what the 80/20 rule is. I was told that the folks I spoke to ended up paying very little tax when it was all calculated. I only did a few days contracting but still claimed against cost and depreciation for a laptop I had to purchase ;)

Re: IT contracting vs perme in Sydney
 

That's been my experience too though i haven't contracted in Sydney for over 2 years now. Get yourself a good tax agent, mine was hopeless and i ended up doing it myself and getting a few grand more in rebate. Claim everything, it's expected of you.

Same here, 80/20?

Re: IT contracting vs perme in Sydney
 

80/20 - not sure also - I work in IT recruitment.

you can either work as a PAYG or through a company that is pte (payroll tax exempt).

Re: IT contracting vs perme in Sydney
 

80/20 rule (or Personal Services Income) is similar to the IR35 ruling in the UK, where by income derived from your own personal efforts can not be paid to other people (i.e. your spouse) to help minimise tax liability, if that person does not contribute to the generation of the income. See link below:

http://www.ato.gov.au/businesses/pat...pc=001/003/026

I have been contracting in Perth for nearly 18 months (and contracted in the UK for 7 years) and still think you are financially better off contracting, certainly where I work you are probably 20-30% better off than if you were a permie.

Cheers

Paul

Re: IT contracting vs perme in Sydney
 

Umm, That wasnt my understanding of the 80/20 (but I must admit I have never seen anything that fully and clearly explains it) I thought the key thing was in regard to whether as a contractor you are employed to achieve a result rather than just perform work. With the former you would be effectively "at risk" of not achieving the result and this somehow entitled you to the tax benefits of being a contractor, where'as with the later your really just a normal employee in the eyes of the ATO.
It does (like IR35) seem a pretty grey area totally open to interpretation and im not aware of it being actively enforced.
I also heard something had changed in relation to a company's position with regard to contractors, it was something about not being able to directly negotiate with a contractor on things that are financial and HR related, if they do they could be deemed as employers of the contractor and forced to offer them the same benefits that a perm employee would get, ie: annual and sick leave etc...

Steve

Re: IT contracting vs perme in Sydney
 

The 80/20 rule is just one of the four tests that you have to apply to determine whether you're running a Personal Services Company (ie. you're a real contractor and can have all the normal company deductions) or not (in which case your deductions are limited.)

The 80/20 rule is that if more than 80% of your income in any one year comes from a single source - which will be the case if you have a contract for a year - then it doesn't help your case!

It's very complicated - the link given for fact sheet from the ATO tries to explain it...

Re: IT contracting vs perme in Sydney
 

OH was perm in UK before we left, got a good bonus that year, putting the wage before we left from reasonable to very good one. (Ended up) Working for the same company but the ANZ subsidiary as a contractor, earned about the same as the UK perm wage. However the rate that was paid was well above what anybody else was coming up with (agencies came up with ie not even to interview stage, only 1 or 2 jobs) - the rate was given as the company needed someone urgently and my OH had specific skills/experience set that would have been hard to obtain elsewhere, so they made sure he said 'yes' with the rate they offered.
Now perm (unfortunately they were not going to carry on paying contract rates), if you times his UK (home counties) salary before bonus £ by about 2 you get the amount he is now getting in $ (Sydney)

Re: IT contracting vs perme in Sydney
 

Basically the legislation was put in place for a similar reason to IR35 as I explain (in simple terms) below. The 80/20 rule (as someone else explained) is just one of the tests, the ato link explains all the tests in more detail.

The bottom line is that like with IR35 there are a large number of people who just carry on operating as the always had pre-PSI legislation (I think it was 2001/2 that it came in). This is true in the UK too where a lot of people carried on in pre-IR35 mode, declaring dividends and share splitting with spouses etc (hence my comments in my original post). The legislation in the UK and here has meant that for a lot of contractors who operate under it there is little advantage in user Ltd Companies any more, hence the growth of umbrella companies like CXC in Perth.

There is a flow chart on the ATO site that allows you to "self test", however it is still open to interpretation to a large extent.

Cheers

Paul