Tax Office rulings

What Makes a Genuine Business?

Tax Office ?Rulings

checklistA common question that arises during the course of each year is someone talking about the fact that they are carrying on a genuine business and do they have to pay tax on their earnings or can they claim tax deductions on a host of various items. 

This topic can get pretty finicky, but the usual starting point for discussions to determine if someone is carrying on a business is set out in "Tax Ruling 97/11 Am I Carrying on a Business of Primary Production".

Although the title talks about primary production, this ruling is the key ruling often used by the Australian Taxation Office and sets out the indicators that the courts have stated are relevant:

  • Whether the activity has a "significant commercial purpose or character". 
  • Whether the taxpayer has more than "just an intention to engage in business". 
  • Whether the taxpayer has a "purpose of profit as well as a prospect of profit from the activity".
  • Whether there is "repetition and regularity of the activity".
  • Whether the activity is of the "same kind and carried on in a similar manner to that of the ordinary trade in that line of business".
  • Whether the activity is "planned, organised and carried on in a businesslike manner such that it is directed at making a profit".
  • "The size, scale and permanency of the activity".
  • Whether the activity is "better described as a hobby, a form of recreation or a sporting activity".

These tests are pretty specific and outline simple tests which, if answered, give a good indication of whether someone is carrying out a genuine business or a hobby.

If you are thinking about an activity and you would like clarification of your potential status, please contact Collins Hume in Ballina, Byron Bay or Lismore on 02 6686 3000.

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Crowd-Sourced Funding Update

Crowd-Sourced Funding Update

ASIC has announced that it is now processing applications from businesses with Australian Financial Services Licenses that have applied to be a Crowd-Sourced Funding Intermediary.

checklistASIC has indicated that the first of the intermediary appointments should be finalised by around the end of October 2017.

If a proprietary limited company wishes to convert to an unlisted public company, so as to take advantage of the Crowd-Sourced Funding legislation, the company will need to lodge a Form 206 "Application for Change of Company Type".

ASIC is required under the Corporations Act to publish a notice in the ASIC Gazette stating it intends to alter the details of the company registration.

One month after the notice is published, the change of company type will take place.

If you are contemplating utilising the current law to become a Crowd-Sourced Funding Company and you would like to have a discussion with us about the process, please contact Collins Hume on 02 6686 3000.

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What's the all the din about DINs

Director Identification Numbers

It has been reported that the government, as part of its reforms to deal with "phoenix" company activity, is planning to introduce "Director Identification Numbers" to allow the Australian Taxation Office and ASIC to track directors and companies and relationships between groups, individuals and other directors.

barcodeOf concern to the government, is the identification of the directors involved in recurring company failures which the government estimates cost over $3 billion each year in lost taxation and GST revenue.

The government is very concerned that, in many of these instances, assets are moved into a new company but the debts are left behind in the original company.

The proposed reforms also include a significant extra obligation for directors of companies, in that directors would be personally responsible for outstanding GST obligations. These obligations are in addition to directors potentially being liable for PAYG withholding of employees and superannuation.

Directors of companies will need to ensure that the company is paying all of its taxation liabilities, including GST, especially prior to a company going into liquidation because these debts would then, in all probability, become a personal debt for the directors.

Prior to accepting appointment as a director of a company, it would be very advisable to verify that all taxation debts owing to the Australian Taxation Office have been paid by the company and that processes are in place to ensure that the directors are immediately notified if a payment is not made.

If you would like to have a discussion with us on any aspect of the proposed introduction of the director identification numbers, please contact us on 02 6686 3000.

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Collins Hume win two more prestigious industry awards

Collins Hume win two more prestigious industry awards

Collins Hume represented the NSW Northern Rivers region by being named SMSF Firm of the Year at the inaugural 2017 SMSF & Accounting Awards held in Sydney this month.

awardCollins Hume Partner Peter Fowler also received a second accolade as SMSF & Accounting Professional of the Year – Regional.

The inaugural SMSF & Accounting Awards recognise individuals and businesses making their mark in SMSF and accounting advice by championing professionalism, quality advice and innovation.

Upon accepting the SMSF Firm of the Year award for Collins Hume, Business Manager David Keith said he was lost for words.

"I'd like to dedicate this award to all of the Collins Hume team," David said. "It's through their collective hard work that we get to shine as a business. As accountants we realise we have the ability to change lives on a daily basis; not only with our clients and the advice we provide to help them improve their business and lives, but also through our giving to people around the world who are much less fortunate than us. It really is a privilege to have these opportunities to change lives." 

Peter Fowler added, "Both awards reflect the great work our team does, especially in our SMSF division. It hasn't been easy with recent superannuation rule changes and ASIC licencing, but we have faced these challenges head-on with success."

The judges commented on the exceptional quality of nominees this year and particularly remarked on the efforts firms and individuals are going to with innovation and client servicing standards.

"We recognise that awards programs aren't always the right fit for professionals who are concentrated on their locale, and we are pleased that we can acknowledge their contribution to the industry," said SMSF Adviser's head of partnerships, Terry Braithwaite. "Congratulations to all finalists and winners for their outstanding achievements at the very first SMSF & Accounting awards."

Founded in 1980, Collins Hume offers tax, accounting, business advice, financial advice, mortgages and lending services across three offices in Ballina, Byron Bay and Lismore.  Collins Hume was shortlisted as NSW Finalists for Accounting Firm of the Year, Community Engagement Program of the Year, Customer Service Firm of the Year, Multi-Service Firm of the Year, Small Business Adviser of the Year and SMSF Firm of the Year.

The full list of winners can be accessed here.

Copyright 2017. Collins Hume Ballina Byron Bay Lismore NSW

Single Touch Payroll coming

Another Challenge – Single Touch Payroll

The Australian government has passed legislation for the introduction of Single Touch Payroll from 1 July 2018.  

payrollBusinesses will be required to commence reporting under Single Touch Payroll (STP) if they are a "substantial employer" on 1 April 2018.

A business is a substantial employer if you have 20 or more employees or you are a member of a wholly-owned group and the group has 20 or more employees in total. 

Once you become a substantial employer you must continue to report under STP even though you may no longer have 20 or more employees, unless the Taxation Commissioner grants you an exemption. 

The introduction of the STP represents the biggest payroll reporting change in Australia's history.

Substantial employers will be required to submit information electronically to the Australian Taxation Office every time the business pays its staff instead of once a year.

These advances will probably necessitate an upgrade to your payroll recording system. You will need to be able to access the new payment summaries and tax file declaration form.

There are also benefits for employers with less than 20 employees moving to the STP system. If you choose to report voluntarily, you will receive relief from your current obligations sooner than other businesses with less than 20 employees. 

If you would like to have a discussion with us relative to the impact that this change will make on your business, please contact Collins Hume on 02 6686 3000 at your earliest opportunity.

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