A freelancer or freelance worker is a person who is self-employed, selling her work and services to her clients and is not necessarily committed to a particular employer long-term. The most common freelance jobs include writer, editer, photographer, web designer, graphic designer, graphic arts, computer programming, among others.
So, if you are thinking about to becoming a freelancer or you already work as one, these 5 tax tips are for you.
1)Apply for an ABN
First of all, an Australian Business Number (ABN) is a unique 11-digit identifier that makes it easier for businesses and all levels of government to interact for certain tax purposes. Any business – individual, company or trust- that is paid for their goods and services needs an ABN to legally operate.
In this context, freelancers are classified as Individuals or Sole Traders, so that means that you have to apply for an ABN.
If you don’t hold an ABN and you don’t quote it on your invoices, your customers would have to withhold a 47% of your payment and give it to the ATO. Also, you are taking the risk that customers don’t hire you until you obtain an ABN.
2) GST and Superannuation
Once you obtain an ABN, you will need it to register Goods and Services Tax (GST) only if your annual income exceeds $75,000. If it does, you need to complete a Business Activity Statement (BAS) monthly, quarterly or annually. In this case, Precent can help you registering your GST and BAS, so you can contact us.
Also, you have to figure out your superannuation on your own. You can contribute to your preferred superannuation fund, or set up a self-managed superannuation fund.
3) Expenses you can claim
As a freelancer, it is likely that some, if not all of your work, will be carried out at home. The expenses you can claim are those only “essential for your business”. Some deductions are:
- New laptops
- Some props
- Magazines/ New websites subscriptions
- Mobile phones
- Bank fees
- Partial internet connection costs
- Stationery items
- Software (such as Xero) / Hardware
- Relevant training courses
- Travel expenses (meetings)
- Depreciations on laptops and computers
- Car expenses (check out our blog about this)
4) Expenses you can’t claim
As most of your work will be carried out at home, it is important to differentiate the expenses you incur, because you can’t claim expenses for private or domestic usage, just those you incur for work. For example, if you work from home, make sure to apportion the internet you use for private purpose and for work. In this case you can’t claim the entire internet bill as a deduction, just the portion you used for work.
5) Keep your receipts and records
In order to claim deductions, keep receipts for expenses like home-office equipment, parking or bridge tolls, mobile phone and internet usage, advertising costs, bank fees, stationery items, new website, and so forth, but only if it’s work-related. You can keep records, as well, for car and travel expenses (check out our blog about this).
Aslo, file invoices in date or cheque number order. It will be far easier to access the details if you happen to be the subject of an audit by the ATO.
Keeping your invoices and receipts is very important to know exactly how much you have earned and how much you have expended, so you can declare this to the ATO by the end of the income year.
Those above are general advice only, for specific and professional advice, and to help you to obtain your ABN, GST and BAS, please contact us at [email protected], or call us to (+ 61) 2 8317 1281.