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New job: from $ per hour to paid by commission on own abn. HELP

Discussion in 'Property Finance' started by Health4wealth, 30th Sep, 2015.

  1. Health4wealth

    Health4wealth Member

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    Hi Guys, I am recently changing from an hourly paid wage to a commissioned paid/contract work. It will require an gst registered abn number. Im not going to have my own sole trader business or anything but I am wondering how this will affect my serviceability and getting loans for investment properties. I have heard stories about people getting their own abn and having to wait for tax returns to be able to gain finance etc. I don't want to put myself in that position. Can anyone provide their expertise or experience.

    Cheers guys!
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    This is quite common with IT professionals when they become ABN contractors instead of PAYG contractors.

    As soon as you are paid to your ABN you will be deemed self employed and all the wonderful rules that come with being self employed (2 years tax returns, etc).

    If you go down this path expect to be on the sidelines for a while.

    You could wait 12 months and go down the path of lo doc loans but your max LVR is 80% and you need to wait 12 months.
     
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  3. Redom

    Redom Mortgage Broker Business Member

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    If you're doing the same thing and can document it, ANZ may take it after 1 year on exception/credit approval. Its not certain, but have done this of late with no hiccups.

    But to open up all options (ANZ have very limited servicing) - you'll best demonstrate 2 year ABN history.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    The ATO will also love you. Is it a sham contractor arrangement? Ie you are off your employer's books for workers compensation, payroll tax, long service, holidays, public holidays, sick leave and super but earning all of your income from the same client? Are you able to contract out your services to your own employees? Do you have any control over pricing of your services per job or just as an hourly rate? Will you need to register for gst?
     
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  5. bob shovel

    bob shovel Well-Known Member

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    I have wondered the same. A friend in it has recently done the same and the pay "is great! " his Mrs has already spent it all! Tax man might have something to say about that.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    @bob shovel - yes, it's called discipline. I have a separate account that I use to quarantine GST & provision for tax (just happens to sit in an offset account).
     
  7. bob shovel

    bob shovel Well-Known Member

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    Is it a take or leave it deal by employer to get people into contract (in most cases)?
    Essentially it's cuting their overheads from managing the payroll sides isn't it?
     
  8. bob shovel

    bob shovel Well-Known Member

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    @Dezzdash has it started yet? If not get talking to a broker asap to sort before you change over. Obviously you need to ensure you have job security etc before taking on a loan one you change over (you may need to keep that under your hat when talking to broker)
     
  9. Greyghost

    Greyghost Well-Known Member

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    Forget loans etc, I would be more concerned with the arrangement with your employer.

    1. As mentoined above there may be issues with super not being paid - deemed as an employee.. Be careful you do not get short changed on this. Maybe your employer needs a new accountant lol
    2. If you are registering an abn then you will be a sole trader (unless you set up a new structure).
    3. If you are registering for gst then you will have to do either quarterly bas or an annual one. Points 2 and 3 will require additional accounting work and or $..
    4. After the first year the ato will issue you quarterly tax instalment notices that you will need to pay.
    4. Will require discipline from you to quarantine some cash to pay your tax bills, gst and instalments.
     
  10. Health4wealth

    Health4wealth Member

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    It will be legit, but its commission based, ill have to register for gst, abn etc. So each different client will pay my boss and he will then pay me.
     
  11. Health4wealth

    Health4wealth Member

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    Yeah I will be doing that for sure, but wont be taking this path if I have to sit on the sidelines for 2 years ahah, time is too valuable.
    I will have to find a way around it or change my investment strategy.
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    Unless you are being paid by different clients, you may be a 'deemed' worker as you are still being paid by one entity and not a legit sub-contractor - that is are you invoicing the same party for all of the work?

    You should see your accountant for specific advice
     
  13. bob shovel

    bob shovel Well-Known Member

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    Would it be possible for @Dezzdash to pick up work on the side? Or only if it's sub contractor route?
     
  14. Health4wealth

    Health4wealth Member

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    guys further to this I wanted to check if I was to open my own company and invoice from the company to my new boss or each client if I decide to go it alone, is it possible to list myself as an employee of the company and thus pay myself a normal hourly rate with left over profits going back to the company. My aim in this would be to suffice for serviceability for the banks. is this a possibility:
     
  15. Health4wealth

    Health4wealth Member

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  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Lenders would look at you and the company as a package = self employed.
     
  17. Greyghost

    Greyghost Well-Known Member

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    If you are self employed the banks generally use the company financials in any case. So it doesn't matter if it is a mix of wages or profits/dividends, it will be looked at as one.

    There are accounting issues such as workcover or superannuation if you go down the wages route.

    Keeping to your query, others may correct me if I'm wrong but in general banks add back your wages and super when looking at self employed income to gross up the company profits.
     
  18. Perthguy

    Perthguy Well-Known Member

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    As others have suggested, you need to have a close look at this arrangement and the tax implications.

    There is more info about this type of arrangement here: https://www.fairwork.gov.au/about-u...ontractors-and-employees-whats-the-difference
     
  19. Redom

    Redom Mortgage Broker Business Member

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    If i understand correctly, this will just be a self employed deal. 2 years ABN history required, 1 years tax return, or else your looking in lo doc space (6 months ABN history usually required).

    Cheers,
    Redom
     
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  20. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Many people in this situation make the argument that they can prove their income via invoices and bank statements showing payment. That's not the issue, it's easy to prove how much you're making.

    The problem is you can't prove how much it's costing you to earn that income. Sure, it might just be a mobile phone and a bit of fuel in the car, but you have to prove it. You can't prove that you're not spending money.

    The only way to demonstrate how much you're making after expenses is via what you pay in tax. By default this is defined by your tax return to to a lesser degree your BAS statements.

    Then of course, there's consistency. Lenders are required to ensure that you can afford the loan today, but also tomorrow. Thus they want to see 2 years of tax returns.

    Generally speaking lo doc lenders want you to have the ABN for 2 years and generally they'll still require some form of income evidence, such as a combination of BAS statements (over the last 12 months), trading account statements or an accountants declaration. I generally find that people who can provide these things confidently will usually qualify for a regular loan anyway.

    There are a few non-conforming lenders that have fewer requirements for lo doc loans, but you'll find yourself paying significantly more for those loans.

    Most investors find that the tax benefits they get from moving to ABN based contracting simply aren't worth the restrictions it puts on their lending ability.
     
    Perthguy likes this.