Over 1 million independent contractors in Australia thrive on the benefits of this employment type, including enhanced flexibility and autonomy. With the freedom of being your own boss comes the responsibility of managing your tax commitments effectively.
If you’re new to independent work, the intricacies of tax can seem overwhelming. We’ve gathered four vital tips to help you remain compliant and ahead of your obligations.
Understand Tax Obligations for Independent Contractors
As an independent worker, you are responsible for saving sufficient portions of your income to pay tax. Let’s break this down:
Income Tax
The ATO It could be easier to deduct the correct tax amount from weekly or monthly income statements. Save it in a separate bank account to ensure you can pay the full amount on time. An individual tax return checklist can guide you in submitting all the relevant information to avoid penalties.
Goods and Services Tax (GST)
You must register for GST if your small business earns $75,000 or more. Collect funds for this expense by charging at least 10% GST to your invoices.
Cash accounting methods can make GST recording more easy, as you only record incoming payments as you receive them.
You can reduce your GST for one year by delaying incoming payments at the end of the tax year to 1st July, as record of it would go on the following tax year’s statement.
Adopt Good Record-Keeping Habits
Store all income statements, business activity statements (BAS), invoices, and receipts.
Record-keeping helps you reconcile your banks, perform audits, and remain compliant.
Consider using modern accounting software to build and update accurate documents. Working with cloud-based systems improves your accessibility, meaning you can adjust your data more easily.
Take Advantage of Tax Deductions
Proof of purchases also lets you claim deductions on various resources that help you operate. Claiming the following tax deductions can significantly reduce your tax bill:
- Motor vehicle expenses
- Advertising
- Cost of depreciating assets like machinery
- Equipment
Work With Forward-Thinking Professionals
Tax planning is the key to maximum annual savings. Connecting with the YBM team will get you on the right track to managing your financial obligations efficiently. Contact us today.