Whether you’ve just started your first side hustle or have been mastering the art of freelancing for years, you’ll know the world of tax is very different for the self-employed.
Instead of your employer simply deducting the right amount of tax from your pay, you now have the responsibility to ensure you’re paying the right amount of tax on time – not to mention working out accurate deductions and GST.
To help make tax time that bit easier for freelancers, we’ve put together our top tips to help you prepare for June 30.
1. Regularly set money aside for tax
There is nothing worse than getting whacked with a tax bill at the end of the financial year and not being prepared. At the beginning of your freelance career, it can be hard to determine your total income and therefore your potential tax bill, so the easiest thing to do is set aside a percentage of your income right from the start. That way, you won’t be caught off guard come June 30.
2. Keep receipts for tax deductions
Tax deductions can be a lifesaver for freelancers trying to get their small business off the ground. The Australian Tax Office (ATO) allows individuals to claim for a variety of expenses, ranging from home office costs to self-education, clothing or travel. Of course, you can only claim expenses directly related to your income and you must have a record to prove it. This means keeping receipts of all your work-related expenses is a MUST.
3. Create separate bank accounts
Make life easy for yourself by separating your personal finances from your work finances. Creating a bank account just for your freelance business will help you track your income and outgoing expenses. This will also make calculating your potential tax bill a lot easier. It may not seem necessary at the start, but once your business is up and running, you could have money flying in and out constantly.
4. Make super contributions
Once you make the switch to freelancing, you will no longer have part of your pay being directed to your super account by your employer. This is now your responsibility. While the ATO does not require you to make super contributions, you may want to consider doing this to save for your retirement. If you’re self-employed, you may be able to claim a tax deduction for your super contributions.
5. Take advantage of software
Keeping track of your books is no longer the arduous manual process that it once was. Now you can take advantage of technology that will no only save you time, but also money. The QuickBooks mobile app is perfect for freelancers, with it’s receipt capture, ability to invoice on the go and instant profit and loss calculations. Throw away the shoebox of receipts and take your freelance business seriously with QuickBooks.
6. Hire an accountant
Even with the right software, lodging your tax return can be an intimidating prospect, especially if you’re new to the self-employed space. It’s always worth the time and money to hire a professional accountant to help you submit your tax return to ensure you maximise your tax deductions. You can also relax knowing your business is doing all the right things in case you are ever audited. To find a professional accountant near you, check out our ProAdvisor program.