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Self-employed tax benefits, but beware ATO traps

Thursday, July 12, 2018

Oh dear. Time to start organising information for your accountant for your 2018 tax return. Yes, it’s a drag but it’s gotta be done.

And to make sure you only pay the tax you’re legally required to pay, there are around 14-or-so specific self-employed, small business tax breaks you should check out.

We’ve put together a list from information provided by the Board of Taxation and the Australian Taxation Office. We’ve ‘de-cluttered’ their explanations. (They use too much tax-speak!) Our list is here.

The tax concessions include:
  • Lower self-employed, small business tax rate of 27.5%.
  • Capital gains breaks if you sell/retire etc.
  • Instant write-off for newly purchased business items.
  • Simpler recording of your stock levels.
These can add up to big money in the right circumstances. But there’s a BIG ‘BUT.’

Our experience is that the ATO has tax traps. The seemingly ordinary wordings of ATO statements are often ‘art terms’ with technical meanings not obvious to the layperson. For example:
  • The ATO says they can’t review your tax return after two years? Wrong! The ATO sent Rod Douglass a bill for $440,000 back-dated almost a decade. After two years of dispute, the ATO backed down in court, admitting the bill was false! We’ve talked about Rod’s case a lot in the past. But it’s just one example.
  • Mark Freeman and Helen Petaia accurately claimed research and development (R&D) grants on their unrelated businesses. But the ATO then claimed fraud, issuing bills for the money back plus penalties. After their respective businesses were wrecked the ATO admitted its fault. Years later Mark and Helen are still seeking compensation. The ATO is giving them the big run-around.
The message is: be careful. The ATO’s seemingly straightforward wording can hide traps. You should ensure good professional accountant assistance in accessing the tax breaks. We’ve put together a commentary explaining these and other ATO traps for self-employed people which is available for Self-Employed Australia members. It’s here. And to help you stay alert we’ll be running a webinar in early August on self-employed tax breaks and traps.

You can join SEA here.

Note. Self-Employed Australia does not provide tax advice. We have external accountants and lawyers to whom we can refer you for tax advice. Our commentary on ATO tax traps can assist in your discussions with your professional tax advisor.

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