Here are six important tax tips for self-employed Australians.
Keep your receipts
If you purchase anything that is work-related, or even partly work-related keep your receipt. Expenses or deductions are the number one way to reduce the amount of tax you’re required to pay each year.
A $5 notebook here, or a $30 hammer there can add up to literally hundreds of dollars by the end of the year so definitely sweat the small stuff.
Know what “receipt-less” tax deductions you might be able to claim
“Receipt-less” deductions can come in handy as well. The most common items include:
- Car expenses up to 5000km
- Home office expenses even if you only work from home sometimes
- Mobile phone expenses
- Internet expenses
There is one caveat though. For all deductions you claim, be sure to only claim the work-related part. If the item is for personal use as well, make sure you apportion the expense so you only claim the work related percentage.
Take advantage of the $20,000 asset write off
Originally slated to end in 2018, the $20,000 asset write off has been extended until June 30, 2019.
The popular scheme allows small business owners to claim a 100% tax deduction for any work-related asset purchase, including vehicles.
In the past items above $300 were required to be depreciated over the ATO defined “working-life” of the item.
Small business owners who are paid cash in hand should make sure they’re declaring it all on their tax return.
The ATO is very clever and uses benchmarking to estimate what they think you should earn. They compare your earnings and expenses to other people providing similar goods and services to you and anything that looks out of place, such as under-reported income is often flagged for closer inspection.
Know your GST obligations
Many small business owners can be caught out by failing to understand their obligations when it comes to registering for GST.
If your income for the financial year exceeds $75,000 you need to register for GST. And, you only have 28 days from the point you earn $75,000 to register; you can’t wait till tax time to do it.
It’s therefore very important to keep track of your earnings closely throughout the year and ensure you take the steps to get registered for GST once you reach $75,000.
Another common mistake we see is small business owners including their GST income on their tax return.
If you’re registered for GST, then your tax return should include your income and expenses net of GST. The GST component is then handled on your Business Activity Statement (BAS) instead.
Don’t go it alone
It’s amazing how often I see people who’ve got themselves into serious financial trouble by going it alone with their small business tax and BAS obligations.
Hiring a reputable tax and BAS agent ensures you’ll have an expert looking after your affairs to ensuring you financial obligations are correct and up to date, leaving you to spend more time running your business.
And, the best part, any tax or BAS agent fees you pay can be claimed as a tax deduction.