Your Next Big Thing.....

> Regarding outsourcing, I've been wondering
> if I can outsource some work to a temp
> agency.... I was thinking maybe I could
> outsource some work kind of as a
> "trial" to see how it went....

In the past, you could have used PPS - a very simple tax deducting system used by subbies.

BUT PPS is now gone and replaced with self-paid tax and ABNs.

Now the ATO has passed a new ruling - and back dated it to last July. The new ruling is aimed at the self-employed Service Provider.

Realise that pretty well everything in our economy depends on Services - plumber, electrician, truck driver, brickie, etc., etc.

This "rule" says in effect, that if 80% of your income comes from a single source you are not a business or subbie, you are an employee. And as an employee you have the standard employee tax deductions (ZERO).

Now imagine a self-employed tiler. He runs his little ads looking or home-owners who want their bathroom retiled or whatever. And he also does a lot of work for builders. And, like a lot of Trade guys, he longs for the big contract.

Now imagine someone like Trump builds another Trump Tower and needs a tiler to tile all the apartments. Our guys get this large contract and for the next 12 months he's set up.

BUT, according to the ATO, 80% or more of his income is from this one contract. And by their new rule that makes him an employee and not a tradesman who got a large contract. As an employee with zero deductions he can't even deduct materials. Can you see where that leads?

Now think of the same tiler who opts to hook up with Drake. Over the course of the next 12 months Drake sends him to 12 different locations to tile the buildings of 12 different builders.

The way companies like Drake work is, they bill the builders and pay the tradesman. So even though our tiler worked at 12 different sites all the money he received came from Drake.

That means, over 80% of his income came to him from Drake. And under the new law, Drake is therefore his employer and he is an employee.

In effect, this law will put an end to companies like Drake from operating like they do.

But this is more widespread. Some franchises work in a similar fashion - head office bills the Franchisee's clients and pays the Franchisee. This new law means the Franchisee is now an employee of the Franchise. (Couriers Please franchisees fall under this, for example)

Or how about builders who contract to companies like Jennings? Suddenly they are considered employees (from last year) and not entitled to any deductions (note: there's a 12 month grace period in the building industry only, at this stage).

How about the IT field? If you get your work through companies like Drake but in the IT field, you're sunk. And if you are contracted to do a large job... or many small jobs because the company is pleased with you... you will not be considered a self-employed person under contract, you'll be considered an employee.

In effect, those who get work through Temp Agencies won't be able to any more (the temp agencies won't exist). And if their business is small, such as just an add-on to their Job, and you are the sole "client" then all their business income comes from you and they will be considered your employee.

As they don't want that... and you shouldn't want that either under our stupid "once you hire you can't fire" labour laws... they are effectively out of business. And you are forced to deal with large companies if you want something done.

You can speak to an accountant about this. But make sure they've done the ATO course which teaches them about this new rule. And then go to another accountant and see what they say. Chances are you'll hear two different versions of what can be done.

OR, wait a while until the dust has settled - and after Howard is voted out (is their any doubt now?) - and see how it all stands.

Hope this gives you something to think about and figure ways around.

Michael Ross.