ATO new-year resolutions

The ATO has released its new year resolutions...and there is not a gym in sight. According to the ATO, the five new year’s resolutions to keep if you want to stay on top of your tax and super in 2023 are 1. Know if you’re in business or not, 2. Keep business details and registrations up to date, 3. Keep good records, 4. Work out if the PSI rules apply to you and 5. Look after yourself.

1. Know if you’re in business or not
Are you earning an increasing income from a side- hustle?
If you answer ‘yes’ to a few of the following questions, the more likely it is your activities are a business:

• Do you intend to be in business? 
• Do you intend and have a prospect of making a profit from your activities?
• Is the size or scale of your activity sufficient to make a profit?
• Are your activities repeated and continuous?
• Are your activities planned, organized, and carried out in a business-like manner?

For example, do you:
- keep business records and have a separate business bank account?
- advertise and sell your goods and services to the public, rather than just to family or friends?
- operate from business premises?
- maintain required licences or qualifications?
- have a formal business plan or budget?
- have a business name or an ABN? We can help you make this call as to whether your side-hustle may be a business.

2. Keep business details and registrations up to date
It’s important to keep your ABN details up to date as emergency services and government agencies use this information to support businesses during disasters. Also, if you’re going to earn over $75,000 this financial year, you’ll need to register for GST . Even if your turnover is below this threshold, it may be advantageous to register.

3. Keep good records
Good record keeping helps you manage your business and its cash flow. It also is your defense should the ATO make an enquiry about your affairs, or select your business for an audit. Feel free to approach us if you need assistance with your record keeping practices.

4. Work out if the PSI rules apply to you
The Personal Services Income (PSI) rules are a suite of ATO provisions designed to prevent persons who derive income from their personal services from “splitting” or “alienating” that income with other persons, and therefore minimising the overall tax payable.

If you cannot pass one of the tests within the PSI rules and do not have a personal services business determination (PSBD) from the Commissioner, then regardless of the trading structure you choose, your PSI income derived will be classified as PSI, which means:

• you will be unable to claim certain deductions against your PSI (basically, your deductions will be limited to those of a normal employee)
• your PSI, less allowable deductions, will be attributed to you, and therefore included in your individual tax return, and taxed at your individual marginal tax rate as though you were an employee.
  

We can assist you in determining whether these rules apply to you and answer any questions you have.

5. Look after yourself
The last few years have thrown some curve balls at small business, so it’s good to be prepared. If you’re struggling, the NewAccess program can help. It’s free, confidential, and designed for small businesses doing it tough.

“The information in this newsletter is factual information only, and is not financial, legal or tax advice. The information is objectively ascertainable information and is not tailored to your personal circumstances. You should consider obtaining professional advice before making a decision in relation to this information.”