More and more Australians are becoming interested in freelancing, and for good reason. As a freelancer, you can take on as many different projects as you can. You can work wherever you want. If you work from home, you can save a lot on transportation costs. It offers numerous benefits, but it also comes with disadvantages. If you are an employee, you don’t have to worry about handling your income tax documents every year. Your employer will do that on your behalf. But if you are a freelancer, you will be the one to do this. Here are other important things about tax that you need to know if you intend to be a freelancer in Australia:
Use Excel sheets to keep records of receipt numbers
If the expense is work-related, keep the receipt or invoice. Good record-keeping will help you stay organised and especially if there’s an audit.
Get an ABN
An Australian Business Number is needed if you want to become a freelancer. How important is it? In general, having an ABN is a requirement for employers to hire you. But if you get hired even without an ABN, almost half of your income will go to the Australian Taxation Office.
Hire an accountant
Obviously, you have to pay for his/her services, but getting one will eventually help you save money by avoiding charges and unnecessary expenses that can be a result of not knowing how to handle your income tax and other taxation-related matters properly. The accountant will also be able to guide you on what items to claim as well as tax deductions. Take note, however, that it is better to hire an accountant who has knowledge and experience with tax requirements of freelancers.
Prepare tax invoices for GST input tax credit and tax deductions
You need a tax invoice for all taxable items that are more than $55 so you can claim GST input tax credit (provided you’re registered for GST) and tax deductions. If you are not registered for GST, you can claim tax deductions on items that you use for work. These items can be software, hardware, transportation costs, and part of your internet connection expenses.
Keep a record of all invoices and receipts
If the expense is work-related, keep the receipt or invoice. You can use an accounting software or even Excel sheets to keep track of receipt numbers. Good record-keeping will help you stay organised and especially if there’s an audit.
Do you have other ideas on what freelancers should know about income tax in Australia? Share your insights in the comments section.