Freelancers: Get the most out of tax time with these simple tips
Ditching the boss and working for yourself freelancer can be one of the most rewarding career moves out there, but with all that added flexibility comes more responsibility at EOFY.
For many freelancers, tax time is met with feelings of dread and complete confusion.
Thankfully, navigating your way through a successful tax return is not as hard as it sounds, and with a little preparation you may be looking at a much bigger tax return than you first expected.
Getting the most from your tax return is all about figuring out which deductions you’re able to claim – but that can be confusing.
Here’s some top tips for getting the most out of your tax return this year.
Find a business advisor you trust
This is the most important investment you can make, not just for tax time but for your business more generally.
While we’re able to give you general tips and advice, nothing’s better than finding someone who can consider your specific circumstances.
They’ll also be able offer insights into your business that you haven’t even considered, and make all the boring stuff like doing the books and balancing the numbers a breeze.
Home office expenses
If you work from home, a percentage of your rent (or even the interest on your mortgage) can be claimed back for the portion of your house that you use solely as a home office.
It’s important to tell your accountant everything about that space in the house as you may also be able to claim costs associated with this room, including cleaning or repairs.
Other running expenses such as the telephone line, internet fees, power and even water bills should be recorded so that other claimable expenses can be worked out.
But it’s important to note that the expense claims must relate to a part of your home that is solely used for business activity
It needs to be a genuine home office.
Tools and equipment
If you’re required buy your own equipment or tools for work, make sure you keep your receipts as the cost of these are deductible.
If you had to get a loan to pay for any of your gear, the interest you pay on that loan is also a tax deduction.
Luckily, the government has extended the $20,000 instant asset write-off – so if you need to upgrade any vehicles or equipment, now’s the time.
Travelling to and from work is not a legal deduction, but any additional travel that you are required to complete as part of your job is.
This could be travel incurred whilst visiting clients, attending conferences, off-site training or even doing deliveries.
When travelling for work, keep a log-book of any kilometres you drive, or if you’re not driving, keep receipts for any flights, taxis, meals or accommodation.
Education and training
As well as claiming any travel to and from training courses, it is important to log any expenses that are related to gaining skills specifically for your employment.
Think tuition fees, books, stationary, and even internet fees if your course is online.
On top of that, if you need to stay ‘up to date’ for your role (think the latest industry trends), you’re also able to claim the cost of relevant magazines, journals or subscriptions.
Memberships and fees
If your role requires you to be a member of a union or organisation, to hold a special licence or to register on any paid service, those fees are deductible and should be reported on your tax return.
On top of that, don’t forget to log any charges you’ve incurred managing your tax returns (e.g accountant fees or programs like MYOB).
You may also be eligible to claim amounts you paid for income protection insurance, and even registered charity donations you’ve made over $2 that year.
Superannuation and GST
It’s recommended that all freelancers make their own super contributions.
If you do pay your own super, it’s good to know that up to $25,000 of these donations can be listed on your tax return as a tax deduction.
When it comes to GST, if you’re turning over more than $75,000 per year it is essential that you register for GST.
If you pay staff wages, you must also be registered for PAYG tax and make sure their superannuation is paid at least every quarter.
With a little record keeping and smart software solutions, the stress of tax time can easily be managed.
The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.