24 Oct 2011 | Small Business
Applying for an ABN and running a business does not change the way a person is treated for income tax purposes. All of the rules that apply to an employee are the same for someone running a business.
Q. I am a UK citizen on a working holiday visa. I have an ABN number as I have been doing a spot of freelance writing here and there. I earn very little through writing, say $65- $100 every 2 weeks. As I am a UK citizen and I will be claiming my tax back through my TFN do I need to be taxing myself through my ABN number, even though it is very small amounts of money?
A. There is no tax that applies to an ABN, only a requirement on a business to deduct 46.5 per cent tax from a supplier that does not quote an ABN. Instead you will need to include your freelance income on the Australian tax return you lodge for the period you are here.
As you are a non-resident tax will be payable at 29 per cent up to a net taxable income of $37,000, after claiming deductions relating to earning your income. Tax will be payable once you lodge your tax return that is due, if you are not using a tax agent, by 31 October.
Q. My wife is considering doing a few courses in specialised child-care with the aim of becoming a consultant to families with problem children. She has not been working for the last 10 years or so. Will it pay for her to register for an ABN and GST, a company, or just to keep it as simple as possible and claim deductable expenses as an individual?
A. Registering as a business with an ABN does not change the tax deductibility of an expense. The gaining of a qualification, to be able to commence earning income, is not tax deductible. Training that improves an existing qualification, which will lead to an increase in earning capacity, is tax deductible.
Q. I have bought a gym and run it myself as a small business. I drive my personal vehicle to and from home carrying tools etc for maintenance. What tax deduction options are available to me?
A. For the travel between home and your place of business to be classed as business the tools would need to be substantial in size. A good test would be if they can be conveniently carried on public transport, they would not help qualify the travel as business.
By making a business call on the way to the Gym or on the way home, or by taking large bundles of towels or other items home and back for washing, this could mean the travel is classed as business. I you can’t classify your travel between home and the gym as business, and you other business travel is infrequent; the cents per kilometre method will probably be the best method to use.
Questions on small business tax or other issues can be emailed to firstname.lastname@example.org
Tax for small business, a survival guide, by Max Newnham is available in bookstores.