The tax changes for contractors and consultants tabled in Parliament yesterday have been welcomed by the Housing Industry Association (HIA).
The Association is satisfied that the new legislation reflects closely the announcement of the Federal Government.
“The tax legislation provides no comfort whatever for tax cheats. But legitimate contractors and consultants running a personal services business have nothing to fear from the legislation,” said the HIA’s Managing Director, Dr Ron Silberberg.
Under the new arrangements, there will be a two-stage approach for contractors and consultants to consider their business status. In the first stage, all contractors and consultants receiving personal services income will be able to self assess against the ‘results’ test, which has been strongly favoured and lobbied for by HIA.
To pass the ‘results’ test contractors will need to self assess that they are being paid for a result, they are liable for rectification of any defective or faulty work and will provide relevant tools or equipment if required to fulfil the contract.
For those contractors and consultants who do not pass the ‘results’ test under self assessment, the 80/20 rules come into play. For those contractors deriving 80% or more of their personal services income from one source, they will have to obtain a Personal Services Business Determination otherwise the limitations on tax deductible business expenses will apply.
For those taxpayers under the 80% threshold, self-assessment procedures apply. If desired a Personal Services Business Determination can be sought.
“Because the Government has elevated the ‘results’ test as the pivotal test of a personal services business, the vast majority of contractors in the building industry will not have to worry about obtaining a Personal Services Business Determination,” said Dr Silberberg.