MYTH BUSTED! Most surprising myth when paying others.
The legal myth I’m doing today is amazing, because I didn’t even know about it! I found this out after I’d been running my own business for about two years. If lawyers don’t know this , then you’d better listen to this one. This relates to when you pay someone, who is a supplier in your small business. You have to check that they have an ABN on their invoice, you have to withhold 49.5% of the amount you would have paid them, you are legally obliged to withhold and then you have to pay that to the ATO. Because if it turns out they are trading without an ABN and the ATO finds out that you were their client, whether they provided you with goods or services, you then have to pay the tax on that invoice,which could be 49.5%.
It’s insane! Absolutely insane! So every time we get an invoice, we check, and 99.9% of people have got ABNs and put it on their invoice. Every now and then we get one that doesn’t have an ABN on their invoice, and then they go, “well, of course I’ve got an ABN”, and then they reissue the invoice and that’s why you can pay your, whatever, business coach or whoever they are in full. But one time, there was a guy who was teaching me, he was training me to do some business-related services and we worked together probably for about a year before I noticed that, shows you that I need to be onto this one more.
So I said to him, “ah, it’s tax time,we’re putting all these invoices through, and we actually shouldn’t have paid you the last 12 months, the full amount, because you don’t have your ABN on your invoice. If you can just shoot me some new invoices, you know, email them through to me, copy your ABN on it, and we’re good.” And, he never did, he refunded me the whole 12 months of fees that I had been working with him. I don’t know why he did that, anyway, as a small business owner, it is your responsibility, to be diligent when you receive an invoice.
If you’re an Australian business and you receive it from an Australian business, so we’re not talking about an overseas supplier, before you pay the invoice, check if they’ve got an ABN, and if they don’t, ask for it. If they still won’t provide it to you, check with your accountant, you have to withhold 49.5% of the invoice, bizarre, but true.
It has been incredible busting legal myths with you, to protect your small business, so that you can lead the lifestyle that you deserve. My name is Cathryn Warburton and I am The Legal Lioness.If you would like to hear more legal myths being busted,pop on to my website legallioness.com.
