Feeds

Budget could mean more paperwork for contractors

Sole traders may have to pay tax monthly, not quarterly

Top three mobile application threats

Australia's 2013/2014 budget could mean extra work for IT contractors.

Such workers are often considered “sole traders” or “independent contractors” for tax purposes and are currently required to submit quarterly payments for the goods and services tax (GST) and personal income tax. Australia has around 750,000 independent contractors and nearly a million on-employing businesses, many of which are sole traders. It's hard to say how many of those work in IT, but this (.XLS) data from the Bureau of Statistics suggests 193,000 are "Professionals" and 116,000 work in "professional, scientific and technical services".

Anecdotally, several tens of thousands of Australians work as IT contractors.

New arrangements announced in the budget mean sole traders will soon be required to make income tax payments each month, as outlined here among “other key revenue measures”.

That won't cost IT pros money, but it will make being a freelancer or contractor less attractive.

To understand why, consider that a prudent contractor will set aside income tax whenever they are paid. Over a quarter, that tax becomes a decent sum that can be invested in a short-term interest-bearing account, or temporarily parked in an offset mortgage. The benefit from doing so is not enormous, but is still a benefit.

Monthly tax will mean contractors and sole traders don't accumulate as much tax and lose the chance to put it to work for their own purposes. Monthly payments will mean the government gains improved cashflow it says will boost its coffers by $1.4bn over the forward estimates.

Details of the new payments scheme have not been revealed, but it seems safe to assume monthly payments will mean more time is needed for taxation paperwork. Freelancers, sole traders and contractors may also gain an extra layer of paperwork, as the wording of the Budget papers says new laws will mean “monthly pay‑as‑you‑go (PAYG) income tax instalments”.

There's no indication GST payments will also go monthly. The two payments are currently integrated. There's no word on just how this will work, but the wording used suggests contractors could now face monthly income tax paperwork and also quarterly business activity statements for GST.

The language used in the Budget papers is fuzzy, as it mentions sole traders but then offers incomes well into the millions as the cut-of points for monthly payments. We're therefore trying to clarify just what the arrangements will be.

Ironically, the Budget also promotes the government's new tax reform plan, which reads, in part, as follows:

“A stronger tax system is also a simpler tax system. Unnecessary complexity reduces investment and hampers innovation, detracting from productivity and growth. Complexity reduces the time businesses and individuals can devote to other, more beneficial, activities such as exploring new commercial opportunities, securing a better job or spending more time with their family. It is also unfair as it disadvantages those who are less able to deal with it, particularly low income earners and small businesses.”

Just how monthly income tax payments won't detract from productivity or distract sole traders from "exploring new commercial activities" is not explained. ®

Bootnote

The author has for many years been eligible for quarterly PAYG payments, but will in no way advance his chance of personal gain by pointing out the new arrangements described in this story.

High performance access to file storage

More from The Register

next story
Putin tells Snowden: Russia conducts no US-style mass surveillance
Gov't is too broke for that, Russian prez says
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
One year on: diplomatic fail as Chinese APT gangs get back to work
Mandiant says past 12 months shows Beijing won't call off its hackers
Lavabit loses contempt of court appeal over protecting Snowden, customers
Judges rule complaints about government power are too little, too late
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Don't let no-hire pact suit witnesses call Steve Jobs a bullyboy, plead Apple and Google
'Irrelevant' character evidence should be excluded – lawyers
EFF: Feds plan to put 52 MILLION FACES into recognition database
System would identify faces as part of biometrics collection
Ex-Tony Blair adviser is new top boss at UK spy-hive GCHQ
Robert Hannigan to replace Sir Iain Lobban in the autumn
Edward Snowden on his Putin TV appearance: 'Why all the criticism?'
Denies Q&A cameo was meant to slam US, big-up Russia
Reprieve for Weev: Court disowns AT&T hacker's conviction
Appeals court strikes down landmark sentence
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.