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News Bulletin : ADA News Bulletin February 2011
27 FEBRUARY 2011 Generally, a worker is an employee if they: -- are paid for the time they work; -- receive paid leave -- for example, sick, annual or recreation, or long service leave; -- are not responsible for providing the materials or equipment required to do their job; -- must perform the duties of their position; -- agree to provide their personal services; -- work hours set by an agreement or award; or -- take no commercial risks and cannot make a profit or loss from the work performed. • In contrast, an independent contractor agrees to produce a designated result for an agreed price. In most cases an independent contractor: -- is paid for results achieved; -- provides all or most of the necessary materials and equipment to complete the work; -- is free to delegate work to other entities; -- has freedom in the way the work is done; -- provides services to the general public and other businesses; -- may accept or refuse work; and -- is in a position to make a profit or loss. • Dentists and practices which do employ contractors should use the ABN lookup site to check and confirm the ABN provided. It will allow them to search and find a contractor's ABN by searching the ABN itself, the Australian company number or the name of the individual or entity. Once the number is found you can click it to view details such as the entity and trading names, the GST registration status and whether the ABN is active. RECORD KEEPING REQUIREMENTS FOR SMALL BUSINESS • The most important reason for keeping good records is that it's a legal requirement. By law, you must keep business records: -- for five years after they are prepared, obtained or the transactions completed, whichever occurs latest; -- in English or in a form that we can access and understand in order to work out the amount of tax you are liable to pay; • You will have to keep records for longer if you use information from those records in a later tax return -- for example, if you claim a loss carried forward from a business activity in an earlier year. Under these circumstances, you must keep the records until the end of any period of review for that later return. • You may also need to keep records relating to assets for capital gains tax purposes for a longer period. • You can issue and store records in either paper or electronic form. • There are penalties for not maintaining the required records and for not keeping them for the required time. Keeping good records will help you avoid these penalties. WHAT DEDUCTIONS CAN YOU CLAIM? • You can claim a deduction for most expenses you incur in carrying on your business and you can generally claim: -- an immediate deduction for expenses necessary for the everyday running of your practice; -- a deduction over a number of years (decline in value) for depreciating assets -- for example, capital assets such X-ray machines, dentist's chairs and tools or computers. • You cannot claim a deduction for all expenses you incur including those for: -- loans the business makes; -- money you draw or borrow from the business as the business owner; -- private or domestic expenses; -- GST you pay if you can claim it as a credit on your activity statement. WHAT RECORDS MUST YOU KEEP? • Most practices will need to keep records of income earned from all sources and your expenses to prepare your activity statements and annual income tax return, and to meet other tax obligations. • The amount of income tax you are liable to pay depends on your taxable business income and business expenses. You have to lodge an annual income tax return showing your business income and expenses. • If you are carrying on a business, you need to keep records explaining all transactions that relate to your tax affairs. These records include: -- income and expense invoices; -- income and expense receipts; -- cash register tapes; -- credit card statements; -- bank deposit books and cheque butts; -- bank account statements. • As well as records of income and expenses, you may need to keep the following specific income tax records (if they apply to your business) for each financial year: -- motor vehicles used by the practice; -- debtors and creditors lists; -- stocktakes; -- depreciating assets; and -- CGT assets. FURTHER INFORMATION A range of information products, services, tools and calculators to assist you in meeting your tax obligations can be found at www. ato.gov.au Source: Australian Government. Australian Taxation Office.
ADA News Bulletin December 2010
ADA News Bulletin March 2011