FAQ

Corporate Hire Purchase is simply where a financier hires goods (cars, machinery etc.) to you for a certain period of equal or structured payments. At the end of this period you will be given ownership of the goods.

Tax deductions come from the depreciation of goods and the interest component of the loan.

Recent tax changes in New South Wales now charge Stamp Duty on each payment at the same rate as leasing which is .75%

How does it work?

Choose perfect new or used car for your needs
Choose the most suitable repayment period, between 24 and 60 months.
Agree on a deposit or final lump sum payment, and monthly repayments to suit your budget.
At the end of the contract, decide if you'd like to pay the final lump sum payment to own your car outright, or refinance this amount, or maybe even trade in for a brand new vehicle. The choice is yours.

What are the benefits?

At the end of the agreement (including your final lump sum payment if applicable), you own your vehicle outright
Fixed monthly payments help with your budgeting.
Flexible contract structured to suit your needs
Advantages for business users
Direct debit available

Chattel Mortgage

A Chattel Mortgage is a particular type of finance used by businesses for the purpose of purchasing a new or used vehicle or other business equipment.

Chattel Mortgage is essentially a Mortgage over goods to be financed. Chattel Mortgage is classed as a cash sale in that the goods automatically become yours on purchase and the finance company takes a mortgage over the chattels. However for tax purposes you can claim depreciation, running costs and interest paid, against your business income. The chattel Mortgage allows businesses to claim a full input tax credit from GST incurred expenses immediately (next BAS statement). Always seek advice from your accountant in regard to this.

The Chattel Mortgage is a very flexible finance option, in that, you have the ability to either finance the full purchase price or alternatively, you can include an upfront deposit or trade-in to reduce our rental commitment, while a Residual payment may also be placed at the end of the term (much like a lease residual) to represent the vehicles end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).

Chattel Mortgage - Benefits

Interest charged and depreciation of the vehicle are tax deductible
No capital outlay is required and cash flow protected
Terms can be flexible and fixed repayments make for easy future budgeting
After full payment of the chattel mortgage agreement, ownership of the goods is transferred to you
You have the option to make payments with or without a balloon payment at the end of the term.

Hire Purchase vs Chattel Mortgage

Under the Chattel Mortgage, the purchaser takes title from the time of purchase. The purchaser (the borrower) finances the purchase price (or part thereof) of the chattel by way of a loan, obtained from a lender, and applies the borrowed funds as payments to the supplier for the chattel.
A hire purchase agreement is a contract for the hire of goods where the title in the goods remains with the financier and does not pass to the purchaser until either the option to purchase is exercised by the purchaser, or the final instalment is paid. This is a fundamental difference between a chattel mortgage arrangement and a hire purchase agreement.

When will an entitlement to an input tax credit arise for a purchaser in relation to the acquisition of a chattel mortgage?
Where the purchaser accounts for GST on a non-cash basis and the chattel purchased is a creditable acquisition the purchaser is entitled to the entire input tax credit in the tax period in which the invoice was received or any payment is made, whichever is the earlier. This is similar to that under a hire purchase agreement.
If the purchaser accounts for GST on a cash basis and the chattel purchased is a creditable acquisition, the purchaser is entitled to the entire input tax credit in the tax period in which the purchaser applies the borrowed funds to make full payment of the chattel at the time of acquisition.

Personal Loan

A Personal loan gives you more financial freedom, ensuring you keep your own funds free for other purposes.

How does it work?

Choose the perfect new or used car for your needs
Choose your most suitable repayment period between 24 and 60 months.
Decide whether you want a lump sum payment
You agree on a deposit and monthly repayments to suit your budget

At the end of the contract, decide if you would like to pay the final lump sum payment to own your car outright, refinance this amount, or maybe even trade in for a new vehicle.

What are the benefits?

At the end of the agreement (including any final payments) you own your car with nothing further to pay.
You have the option of including the on road charges if you wish
Fixed monthly payments help with your budgeting.
Flexible contract structured to suit your needs
Advantages for Business Users
Direct Debit available

Leasing Finance

Leasing can be the most convenient way for a large or small business and professionals to obtain vehicles, plant and machinery, office equipment and fixtures and fittings. It is an easy way of obtaining capital equipment without tying up your own funds, as there is no immediate cash outlay. The advantage of leasing occurs in the situations where the use, not the ownership of the asset is the source of value to your business operation. It is a form of finance that can offer substantial advantages, with tax deductable rentals structured to suit your cash flow.

A finance lease is a tax-effective tool to satisfy business needs without tying up capital. Finance Lease payments are made from pre tax income, not after tax profits, enabling a business to preserve cash flow and utilise the capital elsewhere in the business.

Generally, the vehicle itself is the only security required but in some cases where the lessee is a company, a guarantee from the directors or appropriate person may be required.

How does it work?

Choose the perfect car for your needs
Choose the most suitable hire period usually between 24 and 60 months.
Residual value can be varied according to the contract term
Agree on your annual mileage.
Agree the rentals most suitable for your budget

What are the benefits?

In conjunction with a "Deed of Novation" a Finance Lease is an ideal way to salary package a vehicle.
Can include "on-road-charges"
Can include Comprehensive Motor Insurance Premium
Direct debit available

Personal Lease

A Personal Lease opens the advantages of leasing to private customers. A Personal Lease is an ideal option when you use your vehicle wholly or predominantly for personal, household, or domestic purposes.

How does it work?

Choose the new car you like.
Choose the most suitable hire period usually between 24 and 60 months
Residual value
Agree the rentals most suitable for your budget

What are the benefits?

Flexible contract structured to suit your needs
Residual value available to tailor your payments
Fixed payments

Novated Leasing

Remuneration packaging is the "Buzz Word" for the nineties and one of the greatest aspects of this is the Novated Lease. A Novated Lease takes over the troubles of providing a company car and gives the employee some surprising benefits.

This is simply an arrangement where the employee leases a car from a finance company then Novated the car (via a Novation Agreement) to the employer who then makes all the lease payments for the duration of employment.

Both the employee and the employer will benefit from this arrangement. The employee can choose any car he wishes, receive fleet discounts, change his car anytime, gain equity in the car and purchase it for the residual. Plus many other benefits.

The employee has his fleet "off balance sheet" which can increase his borrowings ratios, has no more liability of lease payments after the employee leases and substantial saving in employment and administration costs. Plus many more benefits.

Note - as from June 1998 all novation documents must comply with the Australian Taxation Office as a "Full Novation" Be assured that we only use finance companies that fully conform to the ATO ruling and have received notification from the Australian Taxation Office that they indeed comply.

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ABN Questions?

What is my ABN

Why have an ABN

Is it compulsory to have an ABN

Updating details

I have an ABN but haven't traded:

My business has ceased trading:

Reactivate my ABN

What is my ABN

You can look up your ABN on the web at www.abr.business.gov.au/(otiz2m55lxzqvbjfh0svva55)/main.aspx by name of company.

Why have an ABN

The ABN is a unique 11 digit identifier which:

helps you claim goods and services tax (GST) credits
lets you claim fuel tax credits you qualify for
if not quoted to businesses you deal with, amounts may be withheld from payments to you under pay as you go (PAYG) withholding, and
allows businesses to easily confirm your details for ordering and invoicing purposes.

Is it compulsory to have an ABN

If your business has a GST turnover of $75000 or more (or $150000 or more for not-for-profit entities) you must register for GST and you'll need an ABN to do this. If your business has a lower GST turnover, it's up to you whether you register.

Taxi Drivers must register for GST regardless of GST turnover.

If you are a sole trader, you must have a tax file number before you can register for an ABN.

Updating Details of ABN

You must update your ABN details within 28 days of change.

To update ABN details via the Australian Business Register you will need to register for a free digital certificate. To do this go to www.ato.gov.au/onlineservices or contact us on 5493 8493

I have an ABN but haven't traded:

Do I need to lodge an Activity Statement?

Yes - you need to lodge Activity Statements as NIL

Do I need to lodge a tax return?

Yes - you will need to lodge a nil tax return if you have an ABN

What do I do if my Business has ceased trading?

If your business is registered for GST, you must apply for cancellation of registration within 21 days of the day on which you ceased trading
If you have an ABN, you need to notify the ATO within 28 days of ceasing business to ensure changes are made to the details shown on the Australian Business Register (ABR)
If a change in your business structure creates a new entity, you need to apply for a new ABN. If your previous business structure is no longer operating an enterprise, you must cancel the ABN

I have cancelled my ABN but now want to start up my business again

If your business starts to trade again in the future or you start a new business and your business structure remains the same, you can apply to have your ABN reactivated.

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When is my return due if I am your client?

Depending on your entity (company, trust, individual etc) the information can be found in the Compliance Program from the ATO as a PDF form at ato.gov.au/content/downloads/COR00205435_NAT7769CP0910.pdf

The compliance program is structured around major market segments. The ATO use them to differentiate their activities across all taxes and payments, including superannuation and excise. The segments are:
? individual's
? micro enterprises – those with an annual turnover under $2 million
? small and medium enterprises – those with an annual turnover of $2 million to $250 million
? large businesses – corporate groups with an annual turnover above $250 million
? non-profit organisations
? government organisations.

Once you have identified your segment, page 5 has the index so you can go to that page and read your compliances.

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Rental Property - What can I claim?

The Tax Office website www.ato.gov.au/rental has detailed fact sheets outlining what you can and can’t claim for your rental property.

These include:

Avoiding common mistakes
Claiming borrowing expenses
Claiming legal expenses
Claiming interest expenses
Claiming repairs and maintenance expenses
Claiming capital works deductions

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Why should you change to SAVE ON TAX?

Changing your Business Accountant can seem like a hassle, but don't be afraid to make a change. We can make the change hassle free for you. Just call in and talk with our friendly team, and we can do the rest. We arrange for the transfer of your financials on your behalf in a professional and ethical way. We then arrange the appropriate forms for you to sign to ensure the transfer is easy for you. Leaving you valuable time to run your business, knowing your future financials are in safe hands.

Business taxation
It is extremely important to choose the right accountant when it comes to your business.
Your success or the success of your business is too important to compromise!
At Save on Tax we offer business planning, auditing, advice and consultancy. We will not only take care of your business taxation and superannuation, but also offer advice from freeing up cash flow, raising capital for expansion to operating your business more efficiently.
Starting a new Business
We can advise you on the right structure needed for you individual situation. We will apply for GST registration, ABN, TFN, PAYG with holding. Set you up with your book keeping software if you wish to do your own, and advise you on the uses. We have a MYOB trainer available to go to your premises to assist in the setup of your specific business.

Superannuation - Does it apply to me?

It is often difficult to ascertain SGC / Work Cover obligations for subcontractors. The ATO provide a “SG Contractors Eligibility Decision Tool” to assist employers in determining their SGC obligations, which can be found at:

http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=SGEligibility.xr4&go=ok

Note: Generally, subcontractors operating under a company, partnership or trust arrangement are excluded from the definition of an “employee” and therefore waive any rights to SGC & Work Cover obligations. However, if your service agreement is with an individual worker rather than the company, partnership or trust, you may still have an obligation for both SGC and Work Cover.

Please refer directly to the link below for more information about Work Cover obligations, particularly to the definition of a “worker” [‘a worker is likely to be a person who performs the same work in the same way as an employee. Even where a person calls themselves a ‘sub-contractor’, if you engage them for work and control the ‘what, when, where, and how’, they are likely to be a worker under the Act’]:

http://www.workcoverqld.com.au/employer/Employerhome/Accide773urance/Taking580Policy/Whosho192sation.html

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Employee or contractor - making the right decision

10/08/2012

In Breif

Employee or contractor? Get the facts

Before your business engages a worker, you need to check whether they are an employee or contractor by examining the working arrangement.

Make the correct decision

It is important you make the correct decision as you will need to meet different tax and super obligations depending on whether your worker is an employee or contractor.

Many businesses are getting this decision wrong as they are basing it on incorrect information. Often workers who should be employees are being incorrectly treated as contractors.

None of the following makes a worker a contractor:

    * your business only needs them for short term or irregular work (such as during busy periods)
    * you are using their specialist qualifications or skills
    * the industry 'norm' is to use contractors
    * they have an Australian business number (ABN)
    * they have a registered business name.

Just because a worker has an ABN or registered business name does not mean they will be a contractor for every job.

To determine whether a worker is an employee or a contractor, you need to consider the whole working arrangement and look at the specific terms and conditions under which the work is performed.

Table: Employee or contractor - know the difference

Employee An employee works in your business and is part of your business. Characteristics of an employee include the following.	Contractor A contractor is running their own business and provides services to your business. Characteristics of a contractor include the following.
Ability to sub-contract/delegate: the worker cannot sub-contract/delegate the work - they cannot pay someone else to do the work.	Ability to sub-contract/delegate: the worker is free to sub-contract/delegate the work - they can pay someone else to do the work.
Basis of payment: the worker is paid: * for the time worked * a price per item or activity * a commission.	Basis of payment: the worker is paid for a result achieved based on the quote they provided.
Equipment, tools and other assets: * your business provides all or most of the equipment, tools and other assets required to complete the work, or * the worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.	Equipment, tools and other assets: the worker provides all or most of the equipment, tools and other assets required to complete the work. The worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.
Commercial risks: the worker takes no commercial risks. Your business is legally responsible for the work performed by the worker and liable for the cost of rectifying any defect in the work.	Commercial risks: the worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Control over work: your business has the right to direct the way in which the worker performs their work.	Control over work: the worker has freedom in the way the work is done subject to the specific terms in any contract or agreement.
Independence: the worker is not operating independently from your business. They work within and are considered part of your business.	Independence: the worker is operating their own business independently from your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.

Get an answer about whether your worker is an employee or contractor

Use the ATO Employee/contractor decision tool to get an answer about whether your worker is an employee or contractor. It is free, anonymous and easy to use.

Once you have answered some simple questions about the working arrangement, you will receive a report (that you can save or print for your records) giving you:

    * an answer about whether your worker is an employee or contractor
    * a summary of the responses you have provided
    * information about the tax and super obligations you need to meet.
Provided your responses accurately reflect the working arrangement, you can rely on the result provided by the tool.

Making employment look like contracting

Sometimes businesses will try to make a working arrangement that is employment look like contracting by:

* requesting their worker to obtain an ABN
* setting up a contract specifying the worker is a contractor.

Often these businesses are trying to illegally lower their labour costs by avoiding their pay as you go (PAYG) withholding and super obligations for the worker.

If a worker is legally an employee, an ABN or contract specifying the worker is a contractor makes no difference and will not:

* override the employment relationship or change the worker into a contractor
* change the PAYG withholding and super obligations a business needs to meet.

The ATO are checking businesses to make sure workers are engaged correctly as either employees or contractors.

Penalties, interest and charges may apply if we find employees being incorrectly treated as contractors.

When other businesses are incorrectly treating employees as contractors

We want to ensure there is a level playing field for business, with all businesses correctly treating workers as either employees or contractors.

If you suspect another business is incorrectly treating employees as contractors, we would like to hear about it.

To find out what you need to do next, refer to How to report a business incorrectly treating employees as contractors.

Obligations you need to meet

You will need to meet different obligations depending on whether your worker is an employee or contractor.

Your obligations for employees

When your worker is an employee there are certain things you need to do in relation to:

    * PAYG withholding
    * super
    * fringe benefits tax (FBT).

PAYG withholding

Your PAYG withholding obligations include:

    * registering for PAYG withholding if you have not already
    * withholding amounts from wages and other payments you make to your employees
    * reporting and paying the amounts withheld to us through your activity statement
    * preparing payment summaries and lodging your annual report
    * keeping PAYG withholding records.

New employees should complete a Tax file number declaration (NAT 3092). You must complete the payer section and send the original to us. (ATO)

For more information, visit Pay as you go (PAYG) withholding - home.

Super

Your super obligations include:

    * working out if you have to pay super
    * setting up super for eligible employees
    * calculating how much to pay and making payments at least quarterly
    * keeping super records.

If you do not meet your super obligations, you will need to pay a super guarantee charge.

For more information, visit Employers superannuation - home.

Fringe benefits tax (FBT)

If you provide fringe benefits, your FBT obligations include:

    * working out how much FBT you have to pay
    * registering for FBT
    * reporting fringe benefits on the employee's payment summary
    * lodging an FBT return and paying FBT
    * keeping FBT records.
For more information about FBT, visit Fringe benefits tax.

Your obligations for contractors

When your worker is a contractor there are certain things you may need to do in relation to:

* PAYG withholding
* super.

You will not have any FBT obligations.

PAYG withholding

Generally, contractors will look after their own tax obligations and you usually do not have to withhold amounts from payments you make to them.

However, you may be required to withhold from payments if:

* the contractor does not quote their ABN to you
* you enter into a voluntary agreement with the contractor to withhold tax from their payments.

If you withhold from a payment, you will need to:

    * report and pay the amounts withheld to us through your activity statement
    * prepare payment summaries and lodge your annual report
    * keep PAYG withholding records.

If a contractor does not quote a valid ABN, you should withhold 46.5% from payments you make to them. You can check if an ABN is valid by using the ABN Lookup tool.
For more information, visit Pay as you go (PAYG) withholding - home.

Super

Your super obligations include:

    * working out if you have to pay super for contractors
    * setting up super for eligible contractors
    * calculating how much to pay and making payments at least quarterly
    * keeping super records.

If you pay a contractor under a contract that is wholly or principally for their labour, you will have to pay super contributions for them.

If you do not meet your super obligations, you will need to pay a super guarantee charge.

For more information, visit Employers superannuation - home.

FBT

You will not have FBT obligations for your contractor.

FBT only applies to benefits provided by an employer to their employee. FBT does not apply to benefits provided by a business to their contractor.

Concessional FBT rules such as those relating to living away from home allowance or salary sacrificing arrangements do not apply to a contractor arrangement. The value of any payment or benefit you provide to a contractor needs to be included as income in the contractor's tax return.

Extracted from ATO website

Last Modified: Tuesday, 31 July 2012