Produced By: Boutique Advisers
Send it. Hey, it actually isn't going anywhere. I feel like I get that. Yeah. And it has to be. But yeah, it's crazy. So you're seeing the last option. I'm gonna try to. Yeah. Yeah, well. Well. That's it was on the. Yeah, yeah. And the reason why? Rest panel. Yeah. And like this morning. I was out. Doing take it off, yeah. Show me a second. He's doing that one. Yeah. Yeah. Stagger. Yeah. Yeah, yeah. Caledonia, you need that. Like everything's locked this particular. Yeah, but. I can. Here it's. Yeah. Yes. Not the same issue. Should they? Yeah. I'm trying to go. Yes, and then you. Sometimes. I'm yeah. Cool. I get you. I think it's probably saying, yeah. You need to find out, yeah. Yeah, yeah, yeah. Yeah. No, no, we've got the HLA. Yeah, I think so. Yeah. Yeah, yeah. Thank you. That's how I uh think yours is, OK? All right. Tim's last name? Right, got it. All set up on here so. Yeah. Neil Neil ranch. Yeah, Rex, yeah. Given. Yeah, Rick. Yeah, great. Thank you so much. I. I was on Neil last time, which? Now, so we don't think one of all was sent out. You got well, Andrew. Hey Cortana, can you? I mean, after the end of the year or just. I really don't know. Introduce. Yeah. So yeah, it's changed. Really. Right. Hey, I'm OK. I've got some special delivery but. Yeah. London right there. Plenty of firms, like pretty much new partners. Yeah, the calculate set in that price. Well. 'Cause you don't know what's going on. It's very hard to say. So I just need to make sure. Yeah. You thought it was crazy to hear that. That's gonna meet. Thanks. It's not just like, yeah, I've got tasks in there to make sure they're done. He didn't mess with it. Yeah, but. Yeah, he was. Dependable. Yeah. Yeah, yeah. Shawn. Sorry. Do you wanna just shuffle those chairs down? Yes. How much data? I'm sorry. I think you were saying. Two weeks. Thank you. Bobby, I'm done. All right. Just about to mention. Yep. Bye bye you signing off? Bye. Bye. Oh, I didn't need one more. I'm not saying. Yeah. Well, thanks, Rex. Den James for coming along to present to the team today. And we've got Kim and Sharney online at home as well. We've got a new set up with our CPD, so we're going to record and transcribe this today and with the hope that we'll use it as a test and our team might be able to get some CPD points out of it. So we'll import your details as being. Professional. And see if we can. Well, it's a. It's a new test for us, obviously something that we'll be doing going forward for our sessions that we're holding these each month as well. Thanks very much. Sing out if you want teas and coffees and stuff and yeah, leave you with it. Lovely. That's fantastic. All right. Thanks guys. All right. We've yeah, thanks. Have a seat in here, guys, and thanks to all of you guys out of time. We've got done done stuff to our team. You guys managed to pick a few topics you wanted us to talk about, so we've got. I'll start off with sort of novel laces or specifically associate laces, and then we've got sajita small business concessions and then personal services income. Going to try and go for 15 minutes each and have time for questions. As we're going on it as far as just. As we're going on it as far. But. Put your hand up a shadow. If you've got any questions as we're going through it. If you want to go into a more or less detail on anything, to share it as well. There we go, there's our topics. So yeah, the key thing is really showing how an associate lease can boost family income. That. That examples that I'll go through as well is. As well as a few definitions and steps. There. The word novated the made-up thing that no one actually knows what it means. The word novated the made-up thing that no one actually knows what it. You can say there that it's in started peaking in 1986 when the FPC Act was introduced. It's pretty much the only place that's used, but yeah, it's replaced with a new contract. Uh. What you're doing with innovative laces? Essentially taking a lease with a finance provider, car provider and the employer's taking it over and providing the employee the benefit of the car. So at associate leases. Is the same as a novated lease, but it's your leasing from an associate, so it might be a related entity of yours, or it's often a a spouse. And yeah, it can work there depending on the the taxable income of the spouse as well as any other FHA concessions that can boost the overall family income. But that yeah, that FBT considerations is the main thing there. Yeah. So car purchase by an associate. So the benefit for this for associate lease over no matter lease an external novated lease is that the external novated lease needs to be new car as an associate lease can be then going to buy a second hand car or it can even be just their existing car. You don't really need to do much to. This arrangement in place you could already have your your family cars between you and then decide that one's getting leased across to the other. So yeah, the employer then essentially takes over the lease on behalf of the employee. AB. Got to be on arm's length terms. The Ato have a tax roll in place. Dictates the residual value. In the lease after whether it's 1234 or five years, terms essentially can't build up equity over lease process. That residual value lines up with roughly the depreciation that the Ato say that applies to that. The associate needs an ABM because they're essentially carrying on business of leasing a car that's very easy to get. They can choose to register for GST, so in most situations the turnover is going to be under 75K. Kaiser. Kaiser. They don't register for GST, but there may be benefits in doing so. Because essentially that climb back to say on the car. Appetite. Purchase it for purchasing a new car. So then yeah, the the employee salary sacrifices the lease payments and the car expenses. And then including any FPT payable or however that's managed. So just just on that with, if your salary sacrificing the ongoing costs because obviously with with like a full have all those amounts kind of built in. Yeah. Yeah. How do you kind of legitimize your costs or how do you, how do you come up with that? Well, for that they well, you you since they're for the associates out of it. Yeah. Yeah, the the way I'd probably do it would be that you get your lease payment amount that's. Whatever the market rate is, and then either estimate your expenses and have them deducted with your pay cycle and then do a reconciliation every now and then. You need need that documentation. Yeah. Or depending on what your employer wants to do, just have them reimburse actual expenses as they arise. Feel feels a bit harder, but Reg, your insurance is easy to go. Yeah. Is 1800 bucks. Take that. My next pay? My next. Yeah, yeah, but otherwise it is. Yeah, yeah, but otherwise it. It does need to be that substantiation and then of Recalation pro process. Yep, at a point. Is there any any extra salary sacrifice amounts? Doesn't go towards expenses. Really needs to go back on as accessible income. OK. So this this is essentially it in the diagram. The Lase can be associated in the employer. Essentially car benefits providers to the employee. Hey. Less pack comes out, so I check fast and that lace payment is paid to the associate. So the easiest way to say this is always in numbers with an example. So we've got Jerry and Beth here and Rex, I know you won't be able to read that, but hopefully others in the room. So Beth, the wife has 200K salary and wage income. Jerry, the husband's on 30K and also has interest income of 2 1/2 K. Looking to purchase a car for 40K the first year depreciation on that car would be 25% of that value. 10K and we're saying here that the market lease amount would be 7 1/2 ka year. And some estimates are only cost there. So fuel at 100 Ka week range, you're at 800 bucks. At 1000. Repairs 1500, so total running costs 8 1/2 grand. I think. Yeah. So I'll show it. It by side. It by. By side I'm sure a lot of you are more familiar with the standard novating lace, which still definitely has benefits. So under the standard Novated lease. You're essentially paying that 7 1/2 grand lease payment to someone else, whereas in the situation on the right that's going to Jerry, he's paying tax on that, but gets depreciation on the car. Summer. But. So he actually gets a tax benefit in that first year. That'll change over time. That'll change over. Is it appreciation reduces a card appreciation? Is generally on a diminishing value basis. 25% of the. First year and then 25% of the remaining. Amount we depreciated in any subsequent years. So for this one it was 10 grand appreciation in the first year, but then the next year would be 25% of 30 grand being that original 40, less than 10K for that first year. So if we skip down to really the bottom line combined after tax cash flow, we've got 161. 446. Compared to 168681 in that associate layer situation. As you often say, with a lot of particularly novated lease examples you say online, they overly simplify things and and don't include everything you need to consider so that this is all well and good there. That doesn't include yet the FBT. And. The situation that was looking into for me was getting out. The situation that was looking into for me was. Getting an electric vehicle which still has FET exemptions at the moment. If that was the case, that would be your position. If that was the case, that would be your. So no ft to pay associate claims GST on the car purchase. Get all your expenses tax deductible. Worst case, you're if you're on the same marginal income, you're getting a tax deduction for a car that you wouldn't otherwise just shifting stuff across to your partner. Best tax year you're shifting income to someone at a lower marginal rate. Best code? Code. There's still other other considerations on what happens at expire the lease when you sell the car. Depending on how that compares to depreciation claim. There any? Balancing adjustments and tax payer will by the associated or GST to pay umm but. In. The in the shorter term, that sort of looking at the five years, what benefit would be per year released in the first year for that one? Is the FBT exemption part for electric or hybrid? Is the FBT exemption part for electric or? Yeah. So, so it was on hybrids up until 31 March this year, but now it's only full electrics. If you had an arrangement in place before 31 March. That conceal apply, yeah. So impact on Jerry? He has increased his after tax income by 7235 S. Showing that there's benefit there to him. Out of the client appreciation. And I don't think tax avoidance really applies anything here. A legitimate arrangement. I sure don't have any issues with him, so the the only taxable considerations I guess would be if you're paying a bit too aggressive with with what your market lease is to increase the benefit that you're getting. But if if you're getting advice. Or comparing it to an actual lease arrangement externally. You shouldn't have any issues. So yeah, the the fat is always something that basically manages managed in this arrangement. If if there isn't an exemption there. And the way FBT would essentially work is that if an employee is getting a benefit, they'll have to be tax paid by the employer. It works out the same to the Ato as if the employee pay that benefit in after tax income. But then with some of the calculations for the car, it can be more beneficial because of sort of some simplification there on the what the benefit the value of the benefit actually provided is? So yeah, if if the employee kept a logbook which is still able to do the. Provide to them is set essentially the the private sector of all these expenses. If they don't keep a logbook, then the method to calculator is 20% of the value of the car. So in this situation, we're saying using that method, the taxable value of the car is 8 grand. Roughly speaking, if they didn't do anything else, they'd have 8 grand of FBT to be paid by the employer. And. And in most cases, they're not going to take the cost themselves. So that come out of the employees tax package and and make it essentially not effective. Most of these arrangements, what you see is so a way to reduce that taxable value is make an after tax contribution. So you often say in these arrangements that the calculations where this is the pretax deductions, this is the after tax deduction to FPT Anil. Another way to sort of make the deduction is that the employee just pays for expenses personally, so that can count as that. Contribution there. So this example, the taxable value is 8 grand. It's 8 1/2 grand of expenses that the employer paid for personally. The remaining taxable value is negative and no FPT. From the employer perspective, like a lot of employers will offer this as sort of part of an attractive trying to be attractive as an employer, give benefit to the employee with no additional cost to them. But I need to make sure that they're properly considering keeping track of any FBT that might apply. And so and that can there's a risk there, but also the additional admin of keeping track of all the expenses and making sure you don't pay too much or too little. Go on his textual income or pace in. Fbt. And then also make the payment to the associate of that actually lease payment, or if you're paying the Bills direct or reimbursing direct. And then best so looking at a salary packaging compared to non salary packaging. And then best so looking at a salary packaging compared to non salary. So both of these salary packaging, the benefit would be the same if it was a traditional novated later and associate lays if we just jump straight to the bottom, there's a saving there. Of three grand. Taking advantage of that concessional FBT treatment. Any questions on any of those calculations? Let's go back slightly and we don't haven't seen a heap of associate laces done. Let's go back slightly and we don't haven't seen a heap of associate laces. I think I've got one employee that had one set up where there is actually a provider that will give you a value on your car. Tell you what the associate like the appropriate lease payment is so you can start it off. Do the lease agreements. I think you pay in fee for that, but then all the ongoing stuff you've got. To do. Yourself. Whereas a lot of the NOVAD lease providers. Why you manage everything and you just pay? Why you manage everything and you just. Pay them the set amount and a bit of a fee so it's. A bit. Easier there, but my situation after did all the modelling, I decided it was too complicated and just put it. Put a nice simple line in the in the model and I'll if I do. Like this I'll do myself. But there are benefits there. But there are. It's there, but it is a bit of mucking around. So whether? Clients want to go through that or employees want to go through that. Clients want to go through that or employees want to go through. I think the big benefit really is if there is that full FPT exemption. I think the big benefit really is if there is that full FPT. So the EVs are the big one and the minor where side border car for 50 grand. You'd be getting most of that as a tax deduction over over five years against the whoever's doing the associate place, so that can be a. Sizeable. Benefit. But then from a sort of, I guess a financial planning perspective, it was like do I buy a petrol car for 30 or 40K or to get the equivalent of it probably 70K. You're getting that tax deduction. You're getting that tax. It it might work out almost the same. Take considerations there. Any questions on any of that? Would you find that you managed to say self-employed people or there are quite a few employees that? Yeah. Well, the the the client that we've. That has done it. That has done. So I've only got one that I know of. So I've only got one that I know. There might be some that do it without involving us there. That is for so third party employees. The employers just sort of ask US all, can we do this is easy enough. And then once after it let him do it because he's been approached to keep him happy? So it often it it more it pay the employee, often approaching the employer saying I want to do this. Are you happy for it? Have you Rex with? Thank you. Next. Thank you. I see. So this station is on small business concessions. The capital guide states. Be aware of how that works that. You sell a capital asset, there's A and there's a gain. You sell a capital asset, there's A and there's a. Then you pay tax on that gain, and there are some concessions at the basic level, depending who's selling it. Some discounting, but this is looking if you're selling a business asset. Where you've got the ability to either reduce, disregard, or defer some of the capital gains. So there are a number of criteria you need to meet, but the types of concessions available are. There's a 15 year exemption, so you've ordered the business for 15 years. Are certain exemptions available? You can reduce the gain by 50%. You can apply a retirement exemption where some money goes into super or you can apply the gain against a new business. The guide until you sell that new business in the cost base will reduce if that's the case. Eligible for the CDT exemptions. Uh. Either the the It's a small business, we turn over less than $2,000,000 and that could potentially be the case. Either the the It's a small business, we turn over less than $2,000,000 and that could potentially be the. You could have a small business that owns a property and that property is part of the business, or it might be owned by the business or owned by. A related trust. So you could have quite a small business. So you could have quite a small. It's got a property and and you can make a gain with that property. And you can you're eligible for the criteria. Or otherwise. You and your associates and related parties need to have a net asset. This is a lesson $60.00. So if you end up with net assets of 6 billion and $1.00 you don't get any of the concessions 5999, you get them all. So something's about the planning of how do you go about that? I'm sorry. Yes, it must be an active asset. We'll have a look at what an active asset is. The whole range of of factors there around concession stakeholders and making sure there is someone actually in control or having its significant influence or significant. So what significant individual? In the ownership of the asset. And if the shares the shares, sorry the an active asset can actually be shares in a company or units in a trust as long as that company or trust has active assets. Look at what the active assets. What is an active acid? So basically, it's useful held ready for use in the course of carrying on a business. And that's held by the taxpayer and affiliated taxpayer or a connected entity. So for instance, it could be. He was connected, interviewed, maybe shares in a related entity. It could be a trust earning shares. Which in a company which is an active company. So she is already twisted the capital trust with 80% of the assets are active. So that basically means that if you have a company which is mainly receiving passive income, it might be even though it's also running a business, it's not active because it doesn't have more. 80% of those assets being active. Some of the examples so it can be property can be shares in the company can be goodwill, trademarks, the types of things we should be active assets. The things which are not active assets, those that are money for personal use. Or driving passive income. So if you own this property and you're renting it out to a third party. It's not an active asset because it's entries for passive use. But if you own this property and it's used within your business, then this property is an active asset and then forward in the the rules. If you own it for more than sorry, less than 15 years, it must be active for half the time. If you own it for more than sorry, less than 15 years, it must be active for half the. And if you voted for more than 15 years, then you need to have had it active for at least 7 or whatever period that is. Generally the active asset is one that's reasonably straightforward to determine. Are we? Do we have an active asset? Just need to make sure. Just need to make. Probably around that 80% asset test. The next one is the $6 million test and this is probably where the planning of the likes of US and also. This type of firm is can come into play because they look at what are. What? Are the active assets and. If we're close to $6 billion, what planning opportunities might we have? So it includes the assets of the text. Affiliates and connected entities. So it would mean that if I own shares in the company, it's not just what I also own, it's also my wife, my trust, and the other entities that I may control. We need to look at all those assets, all those those people on what? Assets are. It also it is a net asset test, so you can reduce off the value of the gross assets, any liabilities that are related to that asset. So we can't, there is excluded assets such as the home. So we can't reduce our net asset value by the debt on our home because our home is excluded that we can reduce the value for the debt against. The business property. Or within the business itself. Other excluded assets of personal use assets. And what it is is super. So if someone's total asset value is 8 million but. 2,000,000 is in their home and two. They they make the $6 million test because the net position is. But not as messy as the vets still included as your asset. It says excluded assets would be subannuation. It. I'll go that way. Let's see. Talk. Yeah, I was aware of. Yeah. Thank you. Thanks. Thank you. Thanks. So I didn't read that little bit in brackets. Good. Pick up and it's misses ring. I've never seen that before actually. Do some giggling. Explicitly going clients who have got super. Excluded that. Personally use. It does as long as it's never been rented. So if you have ever leased that property out for short term or long term rental. Then it's not personal use. So can you purchase holiday home just before you sell a business? And so and the strategies are you attached? Well, it's also a very good. You must have seen the next slide. So planning. So what can we get into super before the period? So the $16.00 is just before you make the sale? So it's basically the minute before. The signing the sign? Yeah, the signing. Sorry. Can we? Sorry can. What more can we get to super within all the caps that we've got available? Cache is the CDT asset. So I've got $1,000,000 sitting in a bank account that's a CGT asset. You know, I use that to reduce my home loan. It's gone. If I use that to buy a personal use asset which is a holiday home. It's gone. So there's some planning there that can be done. To reduce it, need to make sure you bring to account all the liabilities. So. Say you're selling the business for $4 million. And it's going to cost 120 grand in sales commissions. I can treat that as a liability. So we can bring that in, make sure you bring in all the annual lead provisions along service lead provisions, all those things, so that that reduces the overall value of the asset you're selling. Or the tax obligations. Make sure we've got them. Documented at the time. There's one there that if you're thinking about upgrading your home, or maybe you do that if you've got some spare cash, maybe you you do that transaction beforehand. What often people looking to sell their business, you know, two or more years out and so. There can be time to plan to plan it. Probably an obvious one, but just on the timing of it so that the six MIL test it's on date of sale that you're you're looking at that. That's correct, yes. Yeah, immediately before the Sajid today event and most cases Sajid event is signed because. Yeah, OK. Yeah. And I've done some Googling and I'm not sure how appeal This site is. It said boutecadis.com dot au. It's. No. SMSF mentioned there or sites. I'm not sure what that was referencing though. I think maybe including. Would be specific asset inside the file like a property that is used by. No, it's super super easy. Your secretary. Piggies are excluded. Personal asset. Personal use assets are excluded. Yeah. It's surprising how close some people get. But it's not surprising that. It can be now, but in a way that as you're planning for it. You don't know until the day you know, like the exact numbers not known until the day. And so you could be planning and it's you're at 5.9 and you think like I'll do this to get to 5.5 by the time you get there, you're back up to 5.9 with. Either taking dividends out of the company. They all of the time, the use of profits, whatever might have happened, increase in value other assets. So it does need sort of regular check insurance to see where where you're at. Were there any other questions on that on that part of it, the $6 million test? What about moving assets into your family trust and losing control over the asset? Like just maybe eliminating your children or something like that. One thing you need to be concerned about is anti avoidance is there? Is there any anti abortion in what you've done? You also need, I suppose, be concerned if you're going to move assets around. What what capital gains are you creating and doing that? So if you have. Any transfer duties and those sorts of things, you know. But I think all those things are just worth considering. You know, like is, is SMU can do. And either roll it in or roll it out. And escape and. Used to, she's not. Habs are failing. Yeah, if you got a gift money to the kids. Yeah, if you got a gift money to the. OK. So they can go buy their own home or whatever. Maybe do that now rather than later. Yeah. So. So basically the 15 year exemption, so you need to have passed the first ones around? So. So basically the 15 year exemption, so you need to have passed the first ones? The is an active asset and the $6 million test, if that's the case of 15 year exemption. As long as you're selling the business and it's and you are going to retire or you're permanently incapacitated, then anger over 55 the gain is tax free. Uh. And you can put his $1,000,000 per stakeholder I think into super. So outside of the other camps. So in addition to the other camps. Per stakeholder interse. CT with with the retirement is that like a supercondition of release. So you can. You could say I'm gonna retire that then and then go back to where, yeah. Epic. Yeah feat. Epic, yeah. Epic. Me just like that. Me just like. Yeah, yeah, you're doing it the next day. Don't have another business or another one. The intent at that point is like. The 50% asset reduction. The 50% asset. So this one comes after the other 50% CD discount if that's available. So you are in the asset through a trust or individually you can get the 50% discount. This is then you've got that 50% and you can reduce it by further 50%. So it's effectively getting the game down to 1/4. As long as you've obviously held the asset for more than 12 months, you get that first 50% and you do this one before you worry about what do I do with the money now? You still left with 1/4 of the gain. You need to decide what to do with. After the 50% active asset reduction. One of the things you can do is you can put $500,000 into super. Again, this is in addition to all the other caps. Per stakeholder. So if it's husband and wife or both stakeholders, then each get $500,000 that they can sue. So in a very simple case, if you got $4 million. Gained discounted to 2,000,000 discounted to 1,000,000 and there's two stakeholders each can put 500 grand into super. As long as you're under 55, and if you're older 55, you don't need to make that contribution to sweeping. Can just use the retirement exemption, so that's what you're using it for. And still not pay tax. Then in addition you can say, well, I don't really want to put that money into super. Then in addition you can say, well, I don't really want to put that money into. I want to buy another business. You have two years in which you can find another business and reduce the cost base of that other business by whatever that amount is. So if you're not putting the, say, the 500,000 to super, you can buy another business and this capital asset component of that. It's like the Google component of that, the share value. You can reduce by 500 grand. Which obviously made you kicking that down the road. Because when you sell that business, then you've got a lower cost base that you start. And if you don't find a replacement asset within two years, then you're taxed on what that amount bonds that you were trying to pay for two years back. So how long until you have to put the retirement exemption in super? By the time of lodging your tax return for the year that. The gain has. So you wanna you wanna make sure you definitely buy visits in that two years if you're gonna use the rollover relief because you can't then. In you know if 1 1/2 years put it in. No. Yeah, it's very nice again. No. Yeah, it's very nice. And then you can use your reception. Give the name Mr. Jose. Well, so one strategy that's used is even if there's no intention to buy a replacement business, you're still allowed to use that relief to defer the gain 2 years. All right, so here. So the sometimes case where people sell it in the year they've run the business for the whole year, so they've still got business profits of half a mil that get distributed. Then they're not working anymore. Then they're not working. So we're working less so in the future. Or tax deferred is as good as tax save. Or tax deferred is as good as tax. So if after that two years, if you haven't got the replacement asset. Then they sort of go through the steps again for the concessions that you could reduce it by the retirement exemption. And if you've actually bought a replacement asset, you sort of go through the process also you just increase that gain by that amount. Yeah. Yeah. OK. Do you want to do that? Actually get a replacement asset. Actually get. No, sorry. They're gonna do that and then go through the process of. Oh, not buying it. And then and then putting it into super at that point. I had one that they he was 55, but his wife was 53 and. I had one that they he was 55, but his wife was 53. And by deferring it two years meant that she could use a retirement exemption and not have to put it into super. I've done it that way, but yeah, not in the Super yeah. Right. Tech. Very convenient timing for that one, yeah. Uh. So the example. So down the the left hand column, so they saw the business for 4 million. Is assuming there's only one stakeholder. Tell the business for 4 million. They get the discount. Assuming it's subject, it's allowable against the discount. So either a trusted individuals involved. Use the 2 million. Use the small business activity concession of 1,000,000 in the left hand column. The right hand column is assuming he doesn't mean the $6 million test so he doesn't get the use of any of these concessions. So left hand column the million comes off in the 500 grand comes off. He's taxed on 500,000. He's taxed. He's. He's $235,000. In the right hand column, he doesn't get the million. In the right hand column, he doesn't get the. He doesn't get the 500, so his tax payable is now 940,000 instead. So it might be that if you go on the right was put at 6.1 million, you might say, well, I'm prepared to take 3.8 for the business incentive 4 because I'm going to save 740 in tax and I'm only giving up 200. I will get. Maybe that's what I do. Can't massage my. ***** to come to six mil in some other way. I'm sorry it's in the case where there's multiple stakeholders, that's 6,000,000, that's aggregate like that's across. They support everyone. So it shows a really significant benefit and you can imagine there's another stakeholder in this column on the left. There's no tax because both stakeholders get to use the part 100 grand return exemption. That's it. Thank you. Any questions on that? It. Well, thanks again everyone. I guess so. I'm just gonna be talking about the personal services income or ESI as commonly. 2. So oops, sorry. Use the right hand. Insulin. OK. Right. So personal services income has been around since. And so we'll just go through. And so we'll just. Through some of the rules around how that works and in relation to personal services income. So basically what is psi? So it's income that's mainly someone derives from their personal effort. Skill and it can. It can be as individual or sole trader or through a company partnership or trust. So where someone is using an entity that referred to as a personal services entity. Common types of. Income. Or. People that are involved in this personal services income or most commonly will be consultants. Contractors or even doing freelance type work. But basically, the objectives of the Ato, as with these rules, is making sure that the people that are doing the work paying the tax on that income. That's. That's it. Thank you. So I thought I'd just go through initially what is and what isn't personal services income. So what is is sorry, what is not included as personal services income? Is income that is mainly. So mainly refers to anything. Sorry, where is more than 50%. So in this case where more than 50% of the income is derived from selling. Or supplying goods or materials. Then it's not person. Now a good example of that is, you know if you've got a trades person with a bummer and they're doing part of the work, it's parts and material or labor and parts. Now that if the material component is more than the 50%, it's not fair so. Another example of not psi income is if you're using an asset to choose that income. Classic example is if you've got some moving equipment, you actually need that asset to do the work. So it's not just your personal effort. You didn't have the the Earth moving equipment. Couldn't actually do that job. So that's not based on and then the other common example is we've got a substantial business structure. So something like this business here, it's a large professional firm because the income has been generated. By all the one individual multiple employees, then it's not personal services. The arrow is the only arrow to this one. Yeah. Yeah. So if it is personal services income, then we need to look at. Whether. The rules apply. So. There's a couple of rules around it, but effectively what you need to have in the first instance is that there is personal services income, which is what we've talked about is, you know mainly for the reward of someone's personal assertion. And then if that if there is personal services income, then you need to look at the relevant tests. And there's two areas for that. So there's the results test and if you don't pass that, you can look at the personal services business tests. So what is the results test? The results test is passed. If you if more than 75% of the income for the year is produced, has produced a specific result, and that you've also provided all the equipment that was needed. And your reliable for any defects. So classic example as we talked about before the plumber. They have been requested to do some work on fitting a bathroom plumbing for that. Well, there's a specific result. If I don't do it correctly, they've got to come back and fix it up. So in a example like that, you'd say, well, they've passed that test so. We don't then need to look at the further tests. But if. If they if you don't pass that test, we then look to the personal services business tests. And for these tests, if 80% or more of the income does not come from one source, then you just need to make one of these tests. So we've got one of the first ones is the unrelated clients test. This is where you provide services to two or more unassociated clients. And the key here is that you've actually been offering the service to the public. So. You've got to have a website, some sort of advertising. You can't just be. Have to clients and you just you've actually got to be offering services. So another option would be the employment test. So you've actually engaged others to do the work for you, and if they're doing more than 20% of the? Work. The principal work then you would make that test. And then the final one is the business premises test. And this is where you've got your own business premises, which is mainly used to conduct your business and it has to be physically separate from your home. So a classic example of that used to be the doctor. Another room of the house. That's a little separate. So these be physically separate. So if the PSI rules do apply, what does that mean for someone? Well, it basically means that they're limited on the deductions they can claim. And the key one here that we most commonly come across is where people are wanting to claim wages or super paid for to an associate or a spouse. Or non principle type work? So for example, they might be doing the bookkeeping or those sorts of activities. Deductions not allowed. If it's personal services income and not PSB. So it's basically you're treated as though it's employed. Thank you. You get your normal general deductions. Whereas if it's not personal services income, but it's a personal services business, you could then potentially claim those other types of business deductions, which could be the payment of wages or super for an associate. Some other examples you might be able to then claim the rental mortgage on your home as to what as to that part of it that relates to the actual business itself. And then just starting finishing up, I just thought of this is probably a fairly common area for us. Just looking at how superannuation works with the PSI rules. So basically you can claim. Super contributions as deductions. If you genuinely carrying on a business, so if you pass the PS personal service business test. Or the contributions are made for employees or associates under the normal super guarantee rules. But if you're not a personal service business, as I mentioned before, you can't be claiming deductions for associates if they're not doing principal type work. And then the other one that is sort of a bit of a odd area is that for the person that's doing the principal work or the personal services income? There's no super guarantee obligation for that individual, so. It's the income is what they call attributed to the individual. So super guarantee will start. On so you don't have those reporting issues that people now have those same touch payroll types of things. But you can obviously still make those super populations. Yep. That's basically it. Sorry, it was. Yeah, it was an example. This was just the distinction between. With the PSI rules around whether it's personal exertion or not. So in the first example. Susan's provided a training course. $900.00 of the course is in relation to her actually delivering the course, so you know it's 90% of the work. So that's psi. Whereas if you know her second contract, she's providing a software. Which is 80% of the cost. So her personal left it's only 20%. So that is not psi you go. For the benefit there is she doesn't have to take all the income. She can employ an associate. That sort of the. Way it would normally work. Well, she wouldn't have to take all the income correct. And potentially it could be retained within that entity. And I tax. So. You're really looking at the different components of the income that. Has to be broken down. Any other tax questions that Daniel could answer while we? If it comes to mind. You know like. Maybe if if the client has. Some shares with capital losses attached to it, and if they decide to like like if we can, we actually recommend them to sell these shares in confidential. Then repurchase them at some point in the future. Whether it's that, that's OK. I'll look for that in writing. I'd recommend them to to if they sold it, there'd be a a capital gain. Maybe later you're reassessing and saying we think now is a good time to buy. But there is no specific time framework when you buy. There's no. Well. There's no set rules like that. Yeah, the closer it is, the. Crossing over a financial year. Or not that that is actually just the closer it is. Or not that that is actually just the closer it. It's the look at it more dimly, but yeah, there's there are times where something's a sell now and it's a buy later. And yeah, it's definitely a tax buying tactic that we're meeting with client tomorrow. That is got a couple games. Discuss some shares that have losses. And sometimes he does bargain in the future. And sometimes he does bargain in the. But he'd want to be leaving at least a month, and probably probably more. But he'd want to be leaving at least a month, and probably probably. There's no no sort of clear guidelines, but if your advice was, sell them now and buy them later, I don't think it'd matter what that timeline is. The That's the game there, yeah. Let's go back to PSI and service trusts. You know, for medical practitioner for example. Predominantly based on mm hmm. As a consequence, for yet you know in the past in one banking days service trust you try and. Use that as a way to council the expenses for the operation. Practice. From what I understand, there's been no material change in that last 10 or 15 years that's accepted by operating business to have. So no expenses. A services trust and. It is. It is, but they've also changed the board in some new legislation around professional services entities. And. As long as those arrangements are still commercial. That stores, you know, stores seats. But if the principles are not being paid a commercial. From their part of the work from the medical practice, then there is issues. The actual service requests themselves. As long as you don't blight the experiences and the experiences. The enrollment shows what the what they accept as a markup for various things. So. I did have a question on the tax treatment of the small business concession. Say you signed a contract in June and you're getting paid out over time as opposed to just a lump sum. At what point do you have to pay the tax on that? If it's a paid out over two years or three years? I think it depends on the terms of the contract where some contracts are earned out and so there's no defined amount of what that second amount is. Then. That's the future capital gain. So say you get paid X dollars, you get paid noon and over say in a year or in two years. In a year or two years, that's. A separate guide to be assisted. Let's say it's a specific amount in the contracts. It was a stupid event that it's taxable at the time and they may get paid once years later. I can't remember the part was that way. Had that. Yeah, that that unknown earn out is a CGT event crystallized later, but you go back and amend that first year's return. There's concessions on interest that penalties now apply as long as that's done. In a reasonable time frame. Yeah, they try. It's a bit complicated. Yeah, they try. It's a bit. And they you do actually activate, you put in your mint the prior year's tax return. So we've got one at the moment where he didn't really concessions, so he sold. 13 or 15,000,000 or something and then he got another 3 million in this financial year we had to go back and amend the prior year's return. But he gets into all the data. Next year's return to pay the tax. So it seems to be likely on the surface, but it actually allows you that. Time to pay attention in that case to reducing the previous one by the word out and then increasing. The previous one didn't include you, and now it was an unknown number. Hey. So what are you rending again? The priority texture to which had the gate so say it had the $15 million gain in last year's return issue, we got another 3 million. We only put 15 in last year's return. And. We need to go back and amend last year's return with the extra 3 million. But we had until lodging. We have until the date of the that you would pay the tax for the year and we'd all. The actual receipt. Is. That's like, yeah, yeah, yeah. It did scare me when I first. G. Told the client that but you do get the. You do get the time. Did you get a lot of that new clients where stuff's happening with the old account and where you go back in and start a business sale like with concessions and fixing up? Never had to, but I suppose you've got some limitations on when you can, but you wouldn't get put in money. You didn't put the money into sweep over in a certain time. Oh yeah, yeah. Then you go back. Then you go. I don't think you go back and amend an election to defer the tax. In. The future? Purchase that you know you can't go back in the document. Should have been done right previously. Yeah. You have haven't had the need, but I think you'd find this very, very few robots together building. Yup. Work is only business while under finance or. Like, when do you pay tasks along the way? Year, yeah. He sold us. So yeah, solve it. Because you know what the amount is. So say you sell it for 5 million. Yeah. And you're gonna get paid 3 now and then one, then one 'cause. The five is known. Yeah. Yeah. So you've put a put a 2A year sale. Yes. But even if you didn't, what if? Even like portion every year you don't have a full amount actually cover the tax bill. Separate transaction every year. Then you put it in each year's the returns. So if you sold 80% this year and then you sold ten of these sold 10. That would be separate years. You sold 100% now, but you don't get paid at all. Now you know the number. Then you're gonna pay tax at the time you signed it. So the station there with earn out is with earn out. Don't know the number. Yeah. Whereas with your scenario, you do know the number, you just gonna get paid it later. Details. We have the contract. We will bound you out of the text terms of the agreement. Any other questions? Yeah. Thanks so much for coming in and it's good to have some. Yeah, thanks in and it's good to. Have some guests in our usual strategy session and that the content was great. Really good. Really helpful. So thank you. Thanks. Again. Thank you. And likewise with egoism. Yeah. Reversing. Some stuff I. Think it was always useful to getting. Other people's views. People's views. How things are done? See. This one. Thank you. We appreciate you. Oh, right, right. Alright. Well, Andrew was saying. That if you want some sort of. Identity. Yeah, definitely, yeah. Yeah. We don't accept. You know, like Aries? Yeah. Yeah. Because they they they. Oh yeah, from real. Life so. Cancel your strategy, but yeah. Yeah. So what? So. What you up to? He was in Thailand. This is the one we're having to sit back. Plays soccer and. Yeah. So. That's exactly, exactly. That's exactly. That's. What I'll be doing? And then I start. These actually had to come back early because he's dead, has become unworld. Playing with that in six months. It's well, not so much. That's just a expression. Etcetera. Yeah, I can actually show up in such a way. So maybe there is gonna be. That I can. Well, actually I. A chance to go into software. Think it's funny? 'Cause I see. Remember. Thanks so. Much for. It sounds, but I wanna pay much. The information. You're helpful. Very good. Yeah, nice meeting. More. Yeah. OK. You with Dan on. Yeah, yeah, yeah, good. Yeah, like in our assumptions, we use exactly the same figure, but. Meeting you. Happy. Happy. Yeah. Yes, yes. Yes. Yeah, we found it useful when we go. Came and presented on different things to us. Yeah, yeah. So to share the knowledge. Exactly. Definitely one. I mean it, it doesn't really like. Helping each other and yes. Change much to the way he's coming in, but. Surviving this world, I think because not just about getting the information, but also sharing. He's involved. You also doing a good a good time. Yeah. Now they, they, they. Let's see. He just hold it. Yeah, yeah. Have some good. But it was really nice to see you. Hopefully we'll see you. Ideas, right? Next for you, I'll just say. Now. That's like. Fine this afternoon. A. An employee. She's doing a bit of hard time work, but she's just been, yeah. Yeah. He's just. He's. She's got a. Very active. He hasn't done anything great. Yeah. Because that information is. I appreciate that more than anything. It's just like we. Designed a counter. How do you handle those? Sort of. Simple ones? Or would you prefer to avoid those types of things? We can. Is it? There's no business or anything about. Both employees, yeah. Yeah. It's sort of. I understand why they don't have that, but not correctly. Like if it's. If, it's just that and there's no like. It's probably. But I want to make sure that. Like, yeah, I think you guys. Yeah, that's that's great. That's doing it. Thank you. Thank you. Yeah, totally can. But yeah, it's quite a hard thing in a. Don't worry, don't have to agree. Don't worry, don't have to. Redo this so I appreciate that. Help with. Broadcast I. Think if it's like a smaller business where it comes in and gets. Done by a. Person who goes out it works. Yeah. But it needs a number of pairs of hands. That. Yeah, that's why. On it, it doesn't necessarily. Yeah, I think it's in the calendar here all the way when it comes through. I just want I think. I think so. That's all I'm saying. Oh yeah. Think of it. So that's the end of the question. Thank you. Alright. That's alright. Thanks. Yeah. Got it. Get back to it. Las Vegas. Thank you. Sharon, you're trying. It's not the Eagles. See my colour yet? Yeah, yeah, yeah. Oh yeah, that was pretty gutsy, you know. Not just talking about, yeah, definitely. Yeah, he's he would be like someone's got. Plus, I think, yeah, yeah, definitely. And they and the the bridge as well. This, yeah, yeah. The Nasf you might cover beckins. Right, yeah. Too much risk? Just put. Yeah. It's just clearly on Edge now, hasn't it? It's just clearly on Edge now, hasn't. Because I heard that the track blockades are checking. Yeah. Take a. Right, yeah. It's causing chaos. Yeah, definitely. Year and a half or something. Yeah, it was, yeah, yeah. 18 months. Is a chase, yeah. Are you doing your sy next? I saw what movies used to watch at lunch time. Year, yeah. Setting the expectations. Setting the. Councillor Razman, well, we're told this time and. I think. Like they comparing, you know? I think Wayne needs to get some of that calm. I think Wayne needs to get some of. Like sort of trying to tell you that it was otherwise you can't just drag out. Ready to help get that? Let's face it. Like lots of estimates so that you're doing that. Offline, misaligned 70 cheap drones to you. It should be better off at all. Insertion do change as well. So yeah, yeah. Yeah. Perfect. Thank you so much for coming here to ensure. Dial. Ask that out yourself. Is good. Yeah, I'll see you next week anyway. Anyway, I can't wait after my meeting. Yeah, yeah, yeah, I think so. I have to do a message. You talking about? Yeah, yeah, yeah. 20th is. 20th. I can't remember. Sorry, sorry. Yeah finally. I said yesterday. I said. Because it seems to be another network always seems to be on the same day, yeah. OK. I should have, yeah. Is that your laptop? Oh, that was. Thanks for that area. That was yours. Was yours. That's the hardest. Oh yeah, I'm either. OK. Thanks again. Excellent. Thank you. Hind. stopped transcription