THE 80/20 RULE-THE LATEST CHANGES

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There has been some changes for the better made recently which will enable many partnerships and companies to function as they were previously structured. To do this your business will have to pass an additional test.

Originally the three tests stood as follows of which you needed to pass one.

Unrelated Clients Test:There had to be more than two clients who were unrelated, and you were not to receive more than 80% of your income from one of those clients. Related could mean that the two clients were two companies with the same directors for example.

Business Premises Test: Your premises in which the business was conducted had to be totally separate from your own place of residence. An office in your house or a separate building in your yard did not pass the test. The Business Premises had to be on a separate title or totally fenced off from your home with no gateway between them. Mobile businesses do not pass the test.

Employment Test: Your employees completed more than 50% of the work carried out in the business. This could also apply if your business owned a unique piece of equipment which was dedicated to the business, such as a prime mover or a piece of x-ray machinery.

The result of passing one of those test enabled you to carry on your business receiving the same deductions as any other business.

Now the new test is the RESULTS TEST.

The conditions of passing the results test are as follows

1. You produce a result with your personal services work. For example, a bread delivery person takes the bread and delivers it to the shops. Hence the result is the transportation of the bread to arrive safely and be stacked into a certain spot.
2. You are required to supply tools of trade, plant and equipment etc. The bread delivery person supplies the truck and is responsible for the running costs of the truck.
3. If the job is not completed, you are responsible for any defect and the completion of the job. Again the bread delivery driver has to arrange his own replacement driver if he needs time off. He cannot just ring in sick. If the bread is damaged during his delivery process, he has to supply insurance to cover any loss. If entering into a contract you should have a clause stating that you are responsible for any defects.

If you are needing to talk to someone as to where you and your business stands with these rules, we would be happy to be of further assistance. It is important that you get good advice in this relating to your own business as you will be able to make extra claims if you pass the test as a personal services business.

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