Tax tips for the Australian freelancer

Being a freelancer is great in many ways, but it can also be quite difficult, especially when it comes to taxes.

If you are working for a business equipped with an accounting department or at least an accountant, you don’t have to worry about a great number of things regarding finances. But if you are a self-employed freelancer, you are the one who has to bear all the responsibilities of calculating and paying your taxes.

The first thing you need to do as a freelancer in Australia in order to avoid serious trouble with the tax department is to apply for an ABN (Australian Business Number). This is a necessary requirement for any freelancer and will actually affect your chances of getting a job as the vast majority of employers won’t hire you if you don’t have an ABN. Without this legal registration, an employer must give 48.5% of your salary to the Australian Taxation Office, so it’s impossible to work out a financial agreement that will benefit both of you.

You may claim a GST input tax credit and a deduction through a tax invoice for all taxable purposes, but this will work only if you are registered for GST. In case you aren’t, you have the chance to claim a tax deduction of the costs of goods and services. However, in this case, the deduction will apply only to the goods and services necessary for your business.

This may seem like a disadvantage at first, but the fact that there is no exact definition of what is necessary for your business means you have some leeway. For example, a freelance writer can claim a tax deduction on a new laptop used for writing, printing equipment, internet connection, books and magazine subscriptions necessary for developing one’s skills, etc. It’s imperative to consult an experienced financial professional skilled in dealing with freelancers’ taxes in order to develop the most efficient strategy. An online accounting service will be the best choice in this case as it’s convenient and highly cost-efficient.

Basic tax tips for freelancers

Follow this basic advice to ensure you don’t miss any piece of financial data that must be accounted for:

  • Always keep your receipts for work-related purchases of ANY size.
  • Use a specialised software solution to keep a record of all your financial transactions.
  • Keep track of your travel expenses if you travel by car for various work-related purposes.
  • File every invoice immediately to make sure you don’t forget or lose it. This will ensure you don’t have any problems in case of an audit.

Need accounting advice?

At Stone Accountants & Advisors, we are specialists in small business and sole trader taxation matters. If you would like assistance with your accounting or bookkeeping requirements, contact us today.

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product. These strategies don’t apply to everyone – our Wealth Advice Team must pre-qualify you to ensure you will be better off from these strategies and will then provide you with a Statement of Advice which clearly outlines our strategies and advice for you.