Freelancers & Sole Traders Tax Tips

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Taxes 101: Freelancers & Sole Traders Edition

Whether you’re a freelance creative, a mumrepreneur or have taken to plunge to finally launch your own business selling a product or service, you’re a bit spesh when it comes to lodging your tax return.

There are a whole lotta things that you’ll need to consider. But don’t you worry, we’ve got your back.

Get your ABN

If you’ve already established yourself as a business, then chances are you set up your ABN long ago. But if you’re just starting out, do this first! Most business won’t trade with you without this, plus it’s how the Australian Tax Office (ATO) keeps track of your income.

Register for GST

If you’re making over $75,000 per year with your business, you’ll need to register for Goods and Services Tax (GST). Depending on how much you make, you can choose to pay your GST monthly, quarterly or annually. You’ll need to prep and submit a Business Activity Statement (BAS) which you can set up online with the ATO to ensure you’re not missing any deadlines.

Get ahead and create an expense sheet for incoming and outgoing GST, as you’re likely paying GST on the services you need to complete your work (things like cloud storage services, creative software, accounting services, etc.).

Setting money aside regularly

We highly recommend setting aside your designated percentage of tax per income (check your tax bracket and don’t forget to account for the 2% Medicare Levy!) into an account separate from your everyday spending. Hop onto POP’s online tax calculator to figure out how much tax you should be putting aside based on your estimated income.

Just treat it like your savings and squirrel it away in an account you can’t see. Bonus tip: put it into a high interest savings account and rake in some added interest. Come tax time, you’ll have one lump sum ready to go to the taxman!

Claiming Deductions

Okay, now that all the nitty gritty is out of the way, let’s talk about the good bit: what you’re entitled to claim.

Home Expenses

If you use your home space to complete the majority of your work, we’ve got some great news for you, you can claim a portion of your living expenses and costs of running your home against your tax! You’ll be able to claim against a whole range of things from rent, mortgage interest and house insurance (based on the percentage of space used for work) to energy bills, phone and internet bills, and even furniture depreciation, repair and cleaning fees.

Finally, the cost of living feels a little more worth it.

Tools & equipment

Have you purchased tools or equipment to carry out your business? This includes machines such as phones, laptops, and cameras and even power tools for the independent tradesperson.

If you are running a business, you can claim the instant asset write-off up to either $20,000 or $30,000. Chat to one of our POP accountants to find out what tools and equipment you can write-off against your tax.

Car and travel

With your home being your primary place of work, you’re eligible to claim deductions against any travel outside of your home that’s required. This includes car expenses, public transport, taxis, tolls, parking fees and even flights.

Superannuation

As a freelancer or sole trader, you’re not actually required to make contributions to your Superannuation fund. While it’s never a bad idea to put money aside for your future, without a designated employer contribution scheme, you’re free to plan for your future however best suits you.

That said, if you choose to make voluntary contributions to your Superannuation, you’ll be eligible for a deduction on them come tax time.

In order to claim a deduction on your Super contributions, you’ll need to submit and Notice of Intent to Claim (NIT 71121) and there are some other things to consider such as if you’ll surpass your contribution caps. Read up on whether this is the best approach for you, but it’s nice to know you’ll be rewarded just for setting another extra bit of money aside for your future! 

Filing your tax return

At the end of the day, as a sole trader or freelancer, your tax return is going to be pretty unique to your job and situation. We’re here to help you out with this one from start to finish. If you’re operating under an ABN, a tax return with POP Tax will only set you back $129. Plus, you’ve got the option to have that come directly out of your return, or to pay it up front.

Options, we like options.

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