Business owners need to classify workers correctly to minimise the risk of being penalised later for wrongly classifying workers as contractors when they should be employees.

It’s a common area of concern for business owners who engage contractors. Many Fair Work Ombudsman cases have resulted in severe penalties and back payments imposed for engaging someone as a contractor when they should have been paid as an employee.

What’s Required in Contractor Agreements?

You should have a comprehensive agreement with every independent contractor.

The contract should include:

  • Details of the nature of the working relationship to demonstrate that a genuine contractor relationship exists.
  • All rights and obligations of both the contractor and the business.
  • Terms and conditions of the agreement.
  • Whether superannuation applies.
  • The main factors used to assess the worker as a contractor such as independence, ability to delegate work, the basis of payment, the use of tools and equipment, the degree of control or the ability to take on other work.
  • The date of the next review of the contract.

Many factors are involved in assessing whether a worker is deemed to be an employee or contractor, and the relationship can change over time. There is no single overriding factor in deciding if a worker is truly an independent contractor. Therefore, each working relationship must be assessed separately and individually.

Time to Upgrade Contractor Agreements

If a lawful agreement clarifies the terms of engagement and addresses all aspects of the working relationship, this will reduce the risk of later being penalised because of wrongly classifying a worker. But for the contract to be relied upon in court, it must address all aspects of the working relationship in enough detail that there is no room for misinterpretation of terms.

Now is a great time to review and upgrade any agreements you have in place with contractors. Do they measure up?

Talk to us about getting reliable agreements in place for all your independent contractors so you can trust in the terms of the engagement.

Fiskl Advisory is proud to be named as a finalist in the “Start-Up Firm of The Year“ and “Fast-Growing Firm of the Year” categories in the Australian Accounting Awards 2022!

 

The Australian Accounting Awards is the premier event, showcasing the depth of talent in the nation’s accounting professionals and businesses, recognising their success and their passion for the sector.

 

The finalist list, which was announced on Tuesday, 26 April, features over 290 high-achieving professionals across 34 submission-based categories.

 

Reaching the finalists stage is regarded as an incredible achievement across the Australian accounting industry, showcasing the depth of dedication and commitment each individual and business brings to advancing the industry.

 

It’s a great acknowledgement for our team who put our clients first to create and sustain a better world.

 

We are very thankful to all of our wonderful clients and who have trusted and supported us on this journey.

Once you begin trading, you’re faced with a new challenge – successfully managing the course of your brand-new business and making sure it’s a profitable enterprise.

It’s easier to manage your startup’s sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you’re performing against your targets – so you can take action to improve performance, sales, growth and profitability.

But which KPIs should you be tracking?

Sales and conversion rates

An obvious metric to track is the number of sales you’re making each month. You’ll have set a target for these sales in your business plan, so it’s important to record each sale and see how the startup is performing over the first six months of the business.

It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to interest in your products and/or services.

The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.

Sales revenue and other revenues

When customers buy your goods, that creates income (or sales) for the business. Ultimately, no business can succeed unless it’s generating enough sales to keep the wheels turning in the business. 

So, tracking your sales revenue is a vital measure of your financial health. Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets. You can forecast how much working capital you’ll have at a future point in time. And you can see if there’s enough cash in the bank to fund your projects and growth plans.

Cashflow and ongoing cash position

Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT if the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position.

Ideally, you want the business to be in a positive cashflow position (with more cash coming in, than going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed.

Debtor days and aged debt

When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt.

Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business.

Gross profit margin

Generating a profit is crucial to the continued success of your startup. Having metrics to measure your profitability is an important part of managing your finances.

One common way to do this is to track your gross profit margin. This metric shows the amount of profit made BEFORE you deduct things like overheads and the cost of goods sold (COGS), shown as a percentage. The formula for calculating your gross profit margin looks like this:

Gross Profit Margin = (Sales – COGS)/ Sales x 100

By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your new startup – and that’s invaluable as your startup journey unfolds.

If you’re at the early stages of planning out your business idea, please do get in touch. We’ll help you set up a custom KPI dashboard to manage the future path of your business.

Most small businesses in Australia employ people. One of the most common payroll errors is incorrect processing of termination payments when employees leave.

With the introduction of Single Touch Payroll Phase 2, getting payroll correct is more important than ever, as the data is reported directly to other government agencies. If the payroll detail is not accurate, it could affect employees’ benefits or income tax.

Final Payments

Final payments for employees can range from very simple to highly complex. It depends on the circumstances of the termination, the industry, the modern award or registered agreement, age and other factors.

Before you pay an employee who is leaving your business, you’ll need to gather information to ensure accuracy.

  • Final date worked and reason for termination – resignation, retirement, abandonment of work, dismissal, redundancy, end of contract or medical invalidity.
  • Check termination provisions in the relevant award.
  • Check the National Employment Standards for the minimum notice period and redundancy pay if applicable.
  • If you usually pay annual leave loading, this is also paid on termination.
  • Amount of leave owing, and if there are any accrued rostered days off or time in lieu.

A termination payment can be made up of several elements:

  • Final ordinary hours.
  • Unused annual leave, loading and long service leave.
  • Redundancy payment.
  • Pay in lieu of notice.
  • Unused rostered days off.
  • Superannuation.
  • Ex gratia payment.
  • Other payments made in case of death, invalidity, or compensation or as required by certain awards.

Taxation of Termination Payments

Taxation can also be complex for final payments. Some payments are taxed at marginal rates and others at a flat rate. Special codes must be included in some termination pays to notify the ATO of payment types. For some payments, there are thresholds that must be observed that will affect the termination payment’s tax rates and taxable amount.

Getting Help

The best general authorities for learning more about termination payments are the Fair Work Ombudsman and the Australian Taxation Office. For more complex payroll and termination payments, our payroll specialist can help, or we can refer you to an employment law expert if needed.

Fixing termination payroll errors can be costly and time-consuming, not to mention problematic for the employee if categories or taxes are incorrect.

Talk to us before paying employees, so you get it right the first time.

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30 pm (AEDT) on 29 March 2022.

In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.

Other measures for business seek to promote innovation, with expanded “patent box” tax concessions proposed, and provide tax incentives for small business to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support cash flows of small and medium businesses.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

Individuals

  • The low and middle income tax offset will be increased by $420 in the 2021–22 income year to ease the current cost of living pressures.
  • A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease cost of living pressures.
  • Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the COVID-19 pandemic.
  • Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
  • A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
  • CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
  • The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year to assist home buyers who have a lower deposit.

Business

  • Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
  • Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
  • Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
  • The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months.
  • Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
  • Access to employee share schemes in unlisted companies will be expanded.
  • The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year.
  • Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
  • Business registry fees will be streamlined over 3 years from 2023–24.
  • Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.

Excise and customs duty

  • Excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50% from 30 March 2022 for 6 months.
  • The temporary tariff concession for COVID-19 related medical and hygiene products will be made permanent.
  • Administration of fuel and alcohol excise, and excise-equivalent customs duty will be streamlined.

Superannuation

  • The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.

Innovation

  • Corporate income from the commercialisation of patents, issued from 29 March 2022, in respect to agricultural and veterinary (agvet) chemical products will be taxed at an effective rate of 17% for income years starting from 1 July 2023.
  • The effective tax rate of 17% for the “patent box” regime will also be expanded to include patents that have the potential to lower emissions.
  • Following on from the 2021 Federal Budget announcement of the “patent box” regime for medical and biotechnology innovations, the concessional tax treatment will be expanded to include certain overseas jurisdictions with equivalent patent regimes.

Tax administration

  • Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
  • Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgment cycle as their activity statements.
  • Trust and beneficiary income reporting and processing will be digitalised.
  • IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
  • The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years.
  • The start date of the 2019–20 Budget measure for holders of Australian Business Numbers will be deferred by 12 months.

Not-for-profits

  • Melbourne Business School Ltd, Advance Global Australians Ltd, Leaders Institute South Australia Inc, St Patrick’s Cathedral Melbourne Restoration Fund, and various entities related to Community Foundations Australia, have been added to the list of specifically DGRs for a period beginning 1 July 2022.

Indirect tax

  • The Indirect Tax Concession Scheme (ITCS) has been granted or extended to various diplomatic and consular representations.

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now, to increase the rate to 12% incrementally.

In July 2022, the rate will rise to 10.5%. From then on, the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prepare Now for the July Rate Rise

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2022. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
  • Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

Farming businesses have unique accounting needs. The specific challenges you face in running a successful and thriving farm, require tailored business advice that goes beyond simply tax and accounting needs.

Not many other businesses rely on living produce and have so many factors that can dramatically affect profit and loss. Farmers are managing assets, liabilities, payroll, compliance, exchange rate fluctuation, costs, revenue, not to mention day-to-day operations.

The following article covers some of the key areas to consider in your farm accounting:

  1. Your land is an asset
  2. Staying up to date with Government subsidy schemes
  3. Adjusting your farm accounting calendar to suit the government’s
  4. Recording changes in land use
  5. Knowing your stock
  6. Understanding depreciation
  7. Accounting for loss
  8. Keeping track of your profitability
  9. Using the internet and the cloud
  10. Working with your accountant 

Careful management of farm finances can make or break your business. We’ll keep your farm accounts in top shape and provide the support you need in your farm operation. 

Get in touch to talk through your farm business. We are here to work with you.

The ATO’s new directives on the taxation of trust distributions mean it’s essential to review arrangements before the new rules start on 1 July 2022. 

If your trust pays adult-child beneficiaries, then you’ll need to know how the new ATO tax guidance rules could alter your beneficiary arrangements. The proposed changes won’t affect every small business operating through a trust arrangement, but it’s important to check that existing provisions meet the new requirements.

The ATO has released several related documents as a draft package that outlines specific taxpayer arrangements it is examining. It is interested in agreements where parents benefit from trust income allocated to their children or other family members, particularly where tax avoidance could be an issue, and family member beneficiaries are unaware of the provisions.

Another area of focus is the application of Division 7A rules to trusts that pay private companies, especially with related business entities and where the trust and company are part of the same family group.

Do your trust distribution arrangements need to change?

Trust beneficiary arrangements can be complex, and we want to make sure your trust arrangements meet the ATO guidelines so you don’t get penalised. We’ll examine your situation in detail against the new information and advise you if any changes to trust arrangements are required.

With the ATO’s stronger position on the taxation of trust distributions, it’s essential to review arrangements before the end of this financial year. The new rules are set to apply from 1 July 2022.

Book a tax planning session with us today, so we can make sure you’ve got the best beneficiary arrangement for your business and family.

Disaster Recovery Allowance (DRA) is a short term payment to support those who have lost income as a direct result of the floods in South East Queensland starting in February 2022. You can make a claim until 27 August 2022

Who is eligible ?

To receive this allowance, you must meet all of the following. 

  • You were 16 or older at the time of the floods,
  • You are an Australian resident or hold an eligible visa,
  • You work or live in an affected Local Government Area (LGA),
  • You lost income as a direct result of the storms and floods, and
  • You earn less than the average Australian weekly income in the weeks after you had this income loss. ($1,737.10 per week)

If you are part of a couple, you can both claim this allowances. You and your partner will need to make separate claims. 

If you receive any of the following payments during your claim period, you are not eligible for Disaster Recovery Allowance (DRA).

How much can you receive?

If you’re eligible, you’ll get the maximum equivalent rate of JobSeeker Payment or Youth Allowance, depending on your personal circumstances.

If your income is more than the average Australian weekly income amount of $1,737.10, your payment will be reduced to nil.

How to claim ? 

Please click this link for application. 

Our thoughts go out to everyone affected by the severe weather events in Gold Coast and surrounds. If you are unsure if you are eligible for this allowance, please feel free to contact us. We are here to help you.

Knowing when a worker is a contractor or an employee can be tricky, but there are penalties if you get it wrong. Learn the key differences that will help you understand the real nature of the employment relationship before you enter into it.

When is a worker an independent contractor or an employee? Plenty of people ask this question as it can expose businesses and individuals to significant risk and costs under tax and employment law.

Sometimes, a person might seek a contracting relationship for perceived tax benefits or the company might want to keep employment flexible. However, by law, it is the nature of the employment relationship that defines whether someone is a contractor or an actual employee. No one can opt out of basic employment standards and entitlements or their statutory tax and superannuation requirements.

So what are the differences between a contractor and an employee? Let’s break it down.

Employees

  • People working in a contract “of service”, serving the employer under a relevant award, agreement, or employment contract.
  • Considered part of the business and (generally) told how, where, and when they work.
  • Dedicate their time and effort primarily to one organisation.
  • Take no commercial risks and the business is legally responsible for the work done.
  • Employer provides all or most equipment and systems for doing the work.
  • Must apply for time off.
  • Paid by payroll system, with PAYG and any fringe benefits deducted. Eligible for superannuation.
  • Have all minimum rights under employment laws.

Contractors

  • People working in a contract “for service”, serving themselves by delivering outcomes to their client(s).                   
  • Self-employed, running their own independent business.         
  • Can work freely for a number of organisations (or sub-contract the work out).
  • Dictate their own time off and may or may not be available for work.
  • Take commercial risks and are legally responsible for their work.
  • Use all or most of their own equipment and processes.
  • Invoice for their work.
  • Have most workplace rights but different tax, insurance, and superannuation responsibilities

The nature of the employment situation is usually obvious, although project work of fixed duration or finite funding can be complicated. If you’re still not sure, talk to us.

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