What You Need To Know About Taxation

Is the work I arrange through “Don’t Fret Pet!” a business or a hobby?

Whether you ascertain that you are running a business or a hobby you should treat it like a business and deal with clients in a friendly, business-like manner.   That way you will continue to get more bookings and earn more money.  However, it is very important that you investigate your taxation and GST obligations.

The government states the following definitions of a business versus a hobby:

business – you’re in business, if your activity, as a whole, is commercial with an aim to make a profit.

hobby – a hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure.

It is important that you visit https://www.business.gov.au/info/plan-and-start/a-business-or-a-hobby so that you understand the difference and can make the correct decision regarding the services that you offer.

Alternatively, you can call the Australian Tax Office on the Personal Tax Info Line 132 861 or the Small Business Info Line 132 866.  They are very helpful.

Further information can be found at https://www.ato.gov.au/general/the-sharing-economy-and-tax/.

Do I need to pay tax on my income from the “Don’t Fret Pet!” site?

When you advertise your services on a web site it is classed as using a “sharing economy”.  A sharing economy connects buyers/users and sellers/providers through a website or app.

The payments you receive through a sharing economy that are assessable income are subject to income tax.  This means you:

  • must declare the income in your tax return
  • can claim deductions for associated expenses.

You should keep records of income and expenses regardless of how much you earn.

Do I need to keep records?

It is important that you keep records of:

  • all income from all services that you provide
  • receipts of any expenses you are able to claim as deductions
  • logbooks of odometer readings if you are using a car as part of your service.

You can keep records by using the MyDeductions tool on the ATO app. On the app you can:

  • include income from sharing economy activities and record how much GST is included
  • take a photo of receipts and enter details
  • indicate that a percentage is for private use
  • use the ‘Add trip’ function as your logbook

Do I need to register for GST and do I need an ABN?

The following information was correct as at 07/2019.

According to the ATO you only need to register for GST if your business has a GST turnover (gross income minus GST) of $75 000 or more.  Click here for more information.

You need an Australian business number (ABN) to be registered for GST. There are other reasons why you may need to have an ABN but not everyone is entitled to one.

You’re entitled to an ABN if you’re either:

Click here for more information.

If you are confused, we recommend that you watch this video for a simple explanation.  You can also call the ATO on the Personal Tax Info Line 132 861 or the Small Business Info Line: 132 866.  They are very helpful.

We like to be sure you are doing everything right by the ATO and don’t have any problems down the track so, if you determine that you don’t need an ABN, then you must complete the ATO Statement by a Supplier form and upload it to us via your Dashboard #10 ‘My payment details’.

What expenses can I claim?

Keeping good business records will save you time and hassles at the end of the financial year.  It will also help you to claim everything that you are eligible to claim.  The more organised you are, the less you’ll be charged by your accountant.  There are a number of cloud based accounting systems and you can compare them here.

You can also keep records by using the MyDeductions tool on the ATO app. On the app you can:

  • include income from sharing economy activities and record how much GST is included
  • take a photo of receipts and enter details
  • indicate that a percentage is for private use
  • use the ‘Add trip’ function as your logbook.

Here is a list of some of the expenses you may be able to claim though it is important that you obtain advice from your accountant.  You can also see more information at https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/.

  1. “Tools” that you use

You may be able to claim items that you use exclusively for pet sitting.  For example, you may be able to claim grooming equipment, pet treats, pet toys, leashes, kitty litter and poo bags.  If your service includes dog walking, you may be able to deduct what you spend on walking shoes and rain gear.

  1. Self-education

If you attend any pet-care seminars or conferences, you may be able to take a deduction for the cost of the seminar plus travel, meals and accommodation expenses.  Your subscriptions to any work-related magazines or websites may also be claimable.

  1. Technology expenses

You will need to use a computer or tablet to take bookings, do some research, attend online courses and share photos and videos of pets with your clients when they are away.  Partial use of your computer may be an allowable expense.

  1. Your listing on “Don’t Fret Pet!”

Your online listing enables you to advertise the services you offer which should make your monthly fee a claimable expense.

  1. Telephone and Internet

The cost of your phone (landline or mobile) and internet is a claimable expense however, if you also use them for personal use, you can only claim the proportion of the cost that relates to your business.

  1. Fuel for your car

If you offer a pick up and drop off service or a pet taxi service you should record your kilometres to and from your destination in a log book or on the ATO MyDeductions app and keep receipts of fuel that you purchase.

  1. Household bills

You may be able to claim a portion of your household bills such as gas, water, electricity, mowing the lawn and rent.  It is important to discuss this with your accountant as claiming some household expenses can, later on, cause Capital Gains Tax issues if you sell your home.

  1. Pet Food and Treats

If you need to purchase any pet food or treats for the pets you are minding keep the receipts as you may be able to claim that cost.  If the client refunds you for the purchases you will not be able to claim the cost.

  1. Bookkeeping and Accounting

If you use a bookkeeper or an accountant their fees will be claimable as taxation deductions.

  1. Bank Fees

It is advisable to open a bank account especially for your business so that it is easier to keep track of income and expenses.  Bank fees may also be claimable as a tax deduction.

  1. Donations

Donations that you make to a charity that is registered by the ATO as a “Deductible Gift Recipient organisation” can be claimed as a tax deduction.

Should I run my business as a Sole Trader or a Company?

This is something that you need to discuss with either your accountant or the tax office.  The ATO is very helpful so give them a call on 132 861.  We recommend that you work this out when you first start running your service rather than waiting till the end of the financial year.

How do I avoid a tax debt?

It’s a real shock to arrive at the end of the financial year and suddenly realise that you have a rather large tax debt that you hadn’t accounted for.

There are a couple of options to prevent this from happening:

  1. tax pre-payment and pay as you go instalments
  2. put an amount away from each booking into a separate account to cover your possible taxation obligations

Click here to find out more about these options.

 

Why do I need an ABN or have to complete a Statement By A Supplier form?

The following information was correct as at 07/2019.

You need an Australian business number (ABN) to be registered for GST. There are other reasons why you may need to have an ABN but not everyone is entitled to one.

According to the ATO you only need to register for GST if your business has a GST turnover (gross income minus GST) of $75 000 or more.  Click here for more information.

You’re entitled to an ABN if you’re either:

Click here for more information.

We like to be sure you are doing everything right by the ATO and don’t have any problems down the track so, if you determine that you don’t need an ABN, then you must complete the ATO Statement by a Supplier form and upload it to us via your Dashboard #10 ‘My payment details’.

If you are confused, we recommend that you watch this video for a simple explanation.  You can also call the ATO on the Personal Tax Info Line 132 861 or the Small Business Info Line: 132 866.  They are very helpful.

 

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