Understanding PSI Rules – Personal Services Income

By on 29 Jun, 2021

What is PSI PSI is income produced primarily from your own personal services, skill, or labour. Income is classified as PSI when more than 50% of the consideration you receive for a particular contract or transaction is for your labour, skills, or expertise such as consulting, professional or other services. This regardless income was earned as a sole trader or through a separate entity rather than being employed directly by the customer. PSI rules were introduced through the Alienation of Personal Services Income Act 2000, as an anti-avoidance measure to ensure an individual does not lessen or defer their income tax by diverting income received from their personal services through companies, partnerships, or trusts. The Act inserted Part 2–42 “Personal Services Income” into the Income Tax Assessment Act 1997. Subsequently, on 31 August 2001, the Commissioner of Taxation issued further...

What is Business Strategy

By on 20 Mar, 2021

Heraclitus, Greek philosopher, said “Change is the only constant in life.” ~ 500 BC Peter Drucker, whose writings contributed to the philosophical and practical foundations of modern business management, said “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” How can then business owners manage and secure the sustainability, growth, and profitability of their businesses in a competitive, ever-changing and unstable economic arena? How can a business survive a Covid-19, or a GFC or any other adverse market disruptions? STRATEGIC PLANNINGHelps businesses to adapt and get ready for tomorrowGives business owners directionCreates a measure for successIncreases business adaptabilityDrives business decisions Myth Business strategy is for large corporates. It’s a high cost long fancy document with complex jargon. I’m a...

Limited Recourse Borrowing LRBA

By on 18 Jan, 2021

Trustees of a SMSF are prohibited from borrowing monies, except in limited circumstances, as prescribed by section 67 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).  Regulated SMSFs are permitted to invest directly in residential and commercial property as part of their overall investment strategy. Trustees can, under certain conditions, per sections 67A and 67B of the SIS Act, borrow funds from third-party lenders if the SMSF doesn’t have sufficient funds to cover the capital cost. This borrowing arrangement is referred to as a Limited Recourse Borrowing Arrangement (LRBA)  Therefore, an LRBA involves an SMSF trustee taking out a loan from a third-party lender. The trustee then uses those funds to purchase a single asset (or a number of identical assets with the same market value) to...

Directors Duties in Australia

By on 19 Dec, 2020

Overview of Directors There are many different types of directors, such as executive and non-executive directors, managing director, independent directors, shadow directors, alternate directors, de facto directors, and nominee directors. In this article, we will address directors of Australian small-medium companies, who are registered as Office Holders with the Australian Securities and Investment Commission (ASIC), often referred to as De Jure Directors, especially in the UK and US. As a director, you must govern a company on behalf of the shareholders and ensure that a company operates at the highest possible standards and complies with the relevant governing legislations. Australian companies are primarily governed by the Corporations Act 2001 (Cth) and regulated by ASIC. ASIC is responsible for bringing civil or criminal proceedings against companies, the directors, and the...

Thinking SMSF: Part 1/2 – RISKS and BENEFITS

By on 15 Sep, 2020

A Self-managed superannuation fund (SMSF) is a private super fund that you manage yourself for the purpose of providing retirement benefits. It can have up to four* related or unrelated members who are also the trustees of the fund. Managing own SMSF provides the Trustees control over the choice of the investments and insurances, as well as the responsibility for the funds’ compliance. While having control over your own super can be appealing, there are strict and complex rules to follow and comes with risk.  SMSFs are regulated by the Australian Taxation Office (ATO) and governed under different provisions, regulations and legislation. The overriding legislation is the Superannuation Industry (Supervision) Act 1993 (SIS Act), while the payment of taxes is governed under the Income Tax Assessment Act 1997 (ITAA 97). In addition, as an SMSF is a trust, the general law of trusts...

Thinking SMSF: Part 2/2 – DOS and DON’TS

By on 14 Sep, 2020

In Part 1 of THINKING SMSF – RISKS AND BENEFITS, we discussed the rules and regulations governing the management of SMSFs as well as the associated risks and benefits of owning and managing your SMSF. In this part, we will cover the common mistakes we see, with a summary of trustees most common do’s and don’ts.   Do Seek proper advice on whether SMSF is for you. See a qualified professional to assist and guide you in setting up the structure and the fund, register your fund ABN, TFN, formulate an investment strategy, and plan an exit strategy.Set up SMSF bank account and an electronic address.Conform to the superannuation and taxation laws, the Sole Purpose test per s62 SIS Act, inform the ATO of any changes to the fund, submit the SMSF’s annual tax returnsMaintain and keep your personal assets distinct and separate from the fund, as well as those of the individual or...