Hi there,
i usually get paid 50/hr but thinking to resign, then found another job with 80/hr with ABN required, and i need to pay own tax plus super, so compared to both, which one would be a better choice? Is it good to ABN, what happen with the tax return? can i do it by myself etc
Thanks
Yes 80 is a higher number than 50… always has been, always will be.
YMMV
The maths is undeniable
Not if it's negative
Don't forget to account for your super and leave entitlements.
You don't need to pay yourself super.
You don't need to pay yourself super.
You can't not pay yourself super and have it too.
You assume they get leave entitlements in the $50/hr job.
Plus the various insurances as well as admin overhead of making ATO returns.
thanks, that's i thought. Although 80 seems a high number, assuming will be deducted 40% off after tax and super etc, so literally, 50 is better choice ?
Surely the 50/hr regular wage isn't after tax? As a sole trader his tax will be the same either way.
50 is base rate, and company will do tax during each pay , but 80 has abn required and need to pay own tax and super etc
That's rubbish…
Tax is paid on both rates.
And people working under an ABN do not need to pay themselves Super.
Tax is paid on both rates.
Reading it hard jv, but they never said they didn't have to pay taxes.
And people working under an ABN do not need to pay themselves Super.
They don't but it's all part of working out the 'rate' for which is better. If the OP is under $50/hr + super, then the $80/hr flat looks less appealing.
@sumyungguy: It's up to them…
Super has a lot of restrictions… Needs to be balanced against the tax savings…
Anyway, they are not required to contribute to super…
Tax deductions come into play with an ABN, but there are some gotchas if you only work for one company for 12 or 18 months (you will need to check this out as I am a PAYG employee).
There are multiple ways to setup an ABN for a sole trader or a $2 company and there are tax differences and you then need to fill in and adhere to a bunch of tax requirements that can be a PITA.
On the flip side be aware that most contracting rates need to be at least 30% more than a perm price to be comparable. This is 60% more, so you should end up way ahead on $, but the overheads (time) may be an issue.
Are you a consultant or whatever or could you be? You might be able to negotiate better than 80/hr after some experience down the line. If you're a natural salesman then being a contractor through ABN might be better. If not then the regular work might be better.
I am a shift worker, always always get paid with regular hours with 50/hr base rate, etc and abn is new to here, so that's why I put enquiry here
From a tax perspective - Sounds like you'll be a deemed employee for tax purposes and will be subject to the PSI rules.
Essentially meaning you will have limited deductions similar to that of an employee…
Thanks , could you please explain more, I am new to this area
more fees out of the $80ph
@Ade99: Yep. But will still be on top. All are factors in accepting 80 over 50.
Funny thing is I suspect the whole thing will be redundant anyway based on ops post. Will be a deemed employee for PAYG also. Employer might end up in hot water if not structured correctly…
which one would be a better choice?
What does your accountant say?
My who?
i usually get paid 50/hr but thinking to resign,
Can't really help you without more details, like
Are you full time, part time or contract/casual?
Is that $50/hr plus super or including super?
then found another job with 80/hr with ABN required, and i need to pay own tax plus super,
That would be $80/hr to cover everything, so super, tax, sick leave, holidays etc. Also be aware you might need to have certain insurance policies in place as well being you are now a company.
I used to have to have Professional Indemnity Insurance as part of the gig to protect my arse. It wasn't much, like $1400/year, but still things to factor in.
Does your employee even allow you to be a contractor?
it's a different job, nothing to do with regular job
Right, so you are looking at having two jobs. Your regular job and then doing some contracting on the side?
That would've been nice to know at the start…… I think everyone is assuming you stay at the current employer just switching to a contractor arrangement.
sorry about misleading. Put this way, 2 jobs offer, one is regular pay 50/hr, another one is 80/hr with ABN or contractor role, so in this case, which one is better choice ?
@coast666: I'd go for the $50 an hour one. Less paperwork and admin. Less risk.
I have an ABN myself for some casual work and whilst it is a bonus in some ways, it is also a headache and if you don't factor in things correctly, you can be worse off.
@coast666: Clearly $80 is better assuming you have reasonable tenure as a contractor. Total remuneration value for $50 per hour is $55.50 (gross). If paid $80 as a sole trader and making an 11% super contribution (taxed at 15%) effective hourly rate is $72. But you'll contribute 60% more to super compared to your $50 salary.
There is more risk to being a contractor as well, you can be let go at any time with a blink of an eye. Employees would be given some sort of payout unless dismissed under some sort of other action.
you can be let go at any time with a blink of an eye.
depends on what your contract says…
also, employees can also "be let go at any time with a blink of an eye."
Incorrect (ask me why and generate a few more comments for your legacy)
I think at face value I’d go with the $50 one
rock up, go home, get paid.
no faffing around with paperwork and budgeting for leave (sick/holiday/etc)
$50 with holidays, sick leave etc? Or $50 casual?
50 with holiday, sick leave, a part time job. 80 is contract role
Assuming your 50/hr job is working as an employee. You get basic super guarantee 11% plus leave allowance . So your 50/hr job is roughly worth 66/hr. Numerically, 80/hr via ABN as a contractor will generate you more money.
However, working as contractor means you will spend more time doing your own books and paperwork, invoicing , and chasing payments. You might need your own insurance. Depending how much you generate you might need to register for GST and do quarterly BAS. Your accountant will almost certainly charge more to do your taxes. And if you need to get a home loan you are riskier to the banks , and more difficult to get loans. Basically, you become a small business yourself.
As far as I know most private sector employers don't pay leave loading. It's a legacy public sector thing. So likely total renumeration value is $55.50 unless OP is saying $50 is current take-home pay. It's all somewhat unclear…
$80 is absolutely superior, even taking into account leave and super. When you account for leave entitlements (4 weeks annual plus 2 weeks sick), assuming you don't take any during year 1, that equates to an effective 58 weeks of earnings during a year. Alternatively that is 115.38% (58/52) weeks of value in a year. If you add superannuation to this of 11.5% you get 124.37% (115.38%*1.115). $50 * 124.37% = $62.185. Therefore you're better off by at least $17.815 an hour.
That's purely a financial comparison, and before tax at that, obviously choosing a job is more complex.
Assuming OP can work the four weeks normally off for leave and it's not forced to take time off without pay.
Doesn't change the outcome; the percentages are the same whether it's a comparison of one hour or a year. Availability of work is a separate consideration altogether, although obviously worth considering.
I reckon $80ph is a good rate. Do the maths. You won't get paid holidays or personal leave or public holidays, so I'd base it on 44 weeks per year for comparison.
For the $50ph add the super guarantee.
I'd make max deductable super contributions. You fill a form to notify super fund you are claiming a deduction, and they'll deduct 15%. On your tax return you take it off taxable income.
I believe if you have a home office you may be able to claim travel to the office too. Find a good accountant if you're not confident maxing your claims.
The sole trader is just another section on the tax return, no big deal. The first year you'll get to keep all the tax in your bank account and pay a big bill in October, but the ATO will make you PAYG thereafter.
Don't forget to account for your super and leave entitlements.