It’s similar when I receive a letter from the Tax Office!
Today the Tax Office sent me a letter telling me that since I’d declared that I provided management consultancy services for less than half a million a year that I may need to amend my tax return.
Reading further on, I realised that it’s about Personal Services income.
Essentially if I were solely contracting my labour by the hour or day and not running a business, if the clients I found were solely through agents, and if more than 80% of my consulting income came from one source, then how I paid tax should be as an individual, paying PAYG on all of my income, not as an employee through my Pty Ltd company. They’re looking for incoming-splitting (where you pay your spouse, brother or child to be your administrator and avoid tax, for example) or people who are minimising their tax illegally.
I have a call in to my accountant, and I’m doing a little calculation on this year’s income just to be certain, but in the past I have passed the tests with flying colours.
Clearly the tax office is on the look out, so go here and see if you pass the tests too! It may save you heartache if and when there’s an audit (if you’re a management consultant, it’s coming, it’s coming!).