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Australian Osteopathic Association 21
• when you are using their specialist
qualifications or skills;
• when the industry 'norm' is to use
• when they have an ABN.
Don't hesitate to refer to the new
AOA HR Service (see pages 18-19) to seek
clarification in your workplace around
employee or contractor status.
2DO YOU TRULY UNDERSTAND
In order for you to understand your
financials/accounts, you need to first
understand the definition of income.
What follows are the most common
definitions of income:
Assessable. Basically all of your
income including salary, dividends, net
capital gains, interest and rent before
any deductions are allowed; non-
primary production (gross revenue minus
allowable deductions from business).
Gross revenue. The amount generated
in income before expenses if you are a
sole trader or company.
Net profit before tax/non-primary
production/taxable income. The
amount your business has made after all
expenses are paid including salaries, super
contributions, rent and other expenses.
Debtors. Parties who owe you money.
Creditors. Parties you owe money to.
Taxable. Your assessable income
less deductions (work related expenses,
income protection insurance etc.).
Gross. The figure before tax/deductions.
Net. The figure after tax/deductions.
Pre-tax (salary sacrifice). The term
given to expenses paid prior to income
tax being levied.
Adjusted taxable Income. Used for
Centrelink purposes (family payment
and Commonwealth Seniors Health
Care Card), child support, Medicare levy
surcharge purposes (for those who do not
have private health insurance) and HECs.
It is calculated as follows:
• taxable income;
• adjusted fringe benefits amount (not
• tax-free government pensions/benefits;
• target foreign income (earned from
overseas that is not already included in
your taxable income or received in the
form of a fringe benefit);
• reportable super contributions (includes
both reportable employer super
contributions and deductible personal
super contributions); and
• total net investment loss (includes both
net financial investment loss and net
rental property loss).
Dividends. Generally a distribution
from a company to a shareholder paid out
of company profits. Franking credits are
also added to your taxable income but
you receive an offset for the full amount
(the tax paid of 30 cents in the dollar).
In your first year of business, it is likely
when you lodge your tax return as a sole
practitioner that you will have positive
income that you will need to pay tax on,
so be mindful of keeping aside enough
money to cover the tax.
You will then receive an assessment from
the ATO to pay quarterly tax on the income
you are likely to receive for the year ahead.
It is therefore important to maximise
your deductions. One way to do this is to
contribute to superannuation as much as
$25,000 (you will need to be deemed to
be substantially self employed in that you
do not receive salary of more than 10 per
cent of your total income).
Another commonly missed deduction
is that of personal income protection
(insurance that covers you up to 80 per
cent of your income in the event you are
unable to work due to sickness or injury).
You are also likely to be able to claim
capital items of $1000 or less as a deduction.
By understanding the various definitions
of income and what expenses you are
entitled to claim as a self-employed
person, and by reviewing your financial
position throughout the year rather than
when tax time rolls around, you will have
time to appropriately plan. •••
Michelle Tate-Lovery is an Authorised
Representative (235917) of Unified Financial
Services Pty Ltd AFSL 230510. She is the Money
Management Financial Planner of the Year 2012.
Michelle enjoys showing clients what's possible
so they can make decisions from a position of
choice. Go to www.unifiedfs.com.au to learn
about how financial planning can help you.
"IF YOU ARE
THE OWNER OF
A CLINIC, YOU
HAVE TO BE
ADHERE TO THE
FAIR WORK ACT..."
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