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When you have
studied this page you will have more of an idea of what a Small Business is.
Folk
Lore:
There
is always someone who knows EVERYTHING and will pass on his wisdom to all
and sundry. However, as in TaxPlanning and Croquet, Folk Lore does not get
past the Referees and only serves to make life more difficult for the
unskilled, information seeker.
Definition:
A
technical definition of "business" is not of much value. The
Australian Income Tax Assessment Act provides at Section 6 Interpretation:-
"business" includes any profession, trade, employment, vocation or
calling, but does not include occupation as an employee.
----- Sorry about
that, employee!
Australian
Tax Office - ATO:
However,
it might be prudent to understand the point that one can "own a
business" or "be in business". If you own a (sole) business
outright or in Partnership, the Tax situation is easilly understood. You
simply file an extra but separate ATO Individual Tax Return called the
Supplement etc. which allows for TaxPlanning
Company Structure
= Employees
But
if you are "in business" in a Company structure etc. you are only
a shareholder. If you are employed by that Company as the General Manager,
Chief Executive Officer or storeman you are an employee (servant) of that
Company. You are recognized by the ATO as a wage earner on PAYG - Pay As You
Go - Tax, and are not able, as such, to personally TaxPlan.
---- Simple as that!
NB.
A Company Executive, storeman etc. might receive a Fringe Benefit which is
taxed at the highest rate. The benefit is received without the attendant
risk that a sole business owner would have had in obtaining that same
benefit (of a car, tax deductible family holidays on the Gold Coast, Wanaka
NZ etc.)
Our Classless Society:
One of the myths of
Australian society is class distinction. There certainly is a class
distinction. Rich and Poor. Master or Servant. Employer or Employee. Broke
or Wealthy. But only when it comes to Income Tax is it of any real value to
belong to one class or the other.
[Presumably
the poor have as much fun as the rich - for the best things in life are free
- except Croquet, which costs the Rich about $5 per week]
So how do We Distinguish a
"Business" from None Business?
The Australian Tax Office does
not require that a business is making a profit to be a "business"
- or that something making a profit is a "business". It has the
following critera for it to be more likely to be "business" if:-
(1)
large scale operation and/or
(2) involves employees
and/or
(3) frequent
acts/transactions and/or
(4) conducted with a view
to profit and/or
(5) profitable and/or
(6) conducted over a long
period and/or
(7) conducted continuously
and systematically and/or
(8) in commercial premises
and/or
(9) involves items
typically dealt with commercially and/or
(10) involves exercise of
specialized knowledge and/or
(11) significant capital
investment and/or
(12) business records kept
and/or
(13) full-time and/or
(14) market research done
and/or
(15) associated with other
commercial activities of taxpayer and/or
(16) existence of business
organization, registered business name and/or
(17) advertising and/or
(18) active -
you might see "and/or" leaves a bit to be desired - if you desired
to own a "business"
However, you might consider a
"Hobby" They have a capability of making $50,000/year without
paying Income Tax
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Your Choice:
It is not the function
of an ATO employee (Public Servant) to say you are in business or not. It
is basically your Freedom of Choice. A solicitor or accountant or the wise
man in the corner bar of the local, can't make that decision for you -
even if he charges you like a wounded bull --- or drinks all your beer.
Some ATO person
may consider your business as a "hobby" for the ATO person might
(might) consider the loss of a little tax as being more acceptable to him
(to the ATO?) This is because a new Small Business Family can attach itself to an
immediate $50,000/annum none taxable income. This, also, with the handy addition
of $50,000/annum income loss (for Tax purposes) due to deductions and
depreciations.
In a
servant's or employee's income, these would not be tax deductible - which
is why the poor want the rich to pay more tax.
A
Vampire:
With
the *"Vampire"
program able to turn $15,000/annum "Cash" into $300,000/annum of
"Money" for Tax purposes - for about $250/annum (and which is
Tax Deductible) - it seems hard to believe, even strange, that 80% of new
Businesses go broke in three years.
(*It's just a computer application
to rob Banks legally --- which we call "fair enough" but Banks
call "immoral")
Tax
Expert:
The Australian Tax Office
expects you to be the Tax Expert in your affairs - not the ATO employed
clerk.
The Cash Economy:
Sometimes, the so called
"cash economy" is the result of an ATO "hobby"
stamp rather than from backyard, "illegal" or immoral operations.
Which, by the way, might take away income from the more "moral" or licensed
operators.
Moral/licensed operators have the same "Freedom of Choice" to
complain to the media and/or Local Government etc. as the backyarder has
the "Freedom of Choice" to do his thing. Who's
"Freedom of Choice" has the better case is the province of the
Courts of Justice ---- or how much "cash" it costs to bribe
whoever - hence the name "Cash" Economy.
A
Giggle
Some consider that all Australians should have the "Freedom of
Choice" but within
reason ----
But
within who's reason?
The
Polly's? Ho! Ho! Ho!
The Union's? Ho! Ho! Ho!
The
Media's? Ho! Ho! Ho!
Religious?
Ho! Hum!
The
poor? Oh Dear!
A
Public Servant's? You're kidding.
Any
Servant's? Truely?
Within
your reason?
Who the @#%$&#*#@ are you?
The
Lucky Country:
This Australia is the
"Lucky Country" because of it's "Freedom of Choice"
and its Tax "Choice Principle". People who
don't adhere to that Freedom and that Principle (at least for others)
should leave at once.
Folk Lore is Rubbish.
However, it might
be better for a "hobby" operator to keep a set of good books.
The future may have his hobby turn into a "legitimate" business. Then
there is a possibility of retrospection - with a nice tax refund -
if the 'hobby" grows into a business and was carried on while with
paid PAYG job as a day time employee.
You might get all your Income Tax back - or
you might not. So have a good story to
tell the ATO
Best
Case Scenario:
Why put it off? Do it now.
Own a Business. All it takes to be in "business" is to say the
words "I'm in Business" and start keeping a set of books, ETC.
You have to start your apprenticeship sometime - either as a Business
Person or as a welfare recipient - and the former might have more fun and
less worry.
Due to John Howard's new and better tax and the fight against terrorists
and other naughty boys this page is due for revision. But we have to wait
for Johnny to finish off his fight against them, the WMD, and labor to update it.
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