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The ultimate tax time checklist for sole traders

by Samuel Williamson

3 min read

The End of Financial Year is creeping up but, even if you’ve been a bit slack on the tax front, there’s still time to whip your books into shape.

Becoming a sole trader might offer a lot of freedom in your work life, but it also means you shoulder the responsibility of managing your taxes. Use our comprehensive checklist to ensure you are tax compliant and can maximise all your deductions this financial year.

Set your records straight

Get started by checking that all your invoices have been correctly inputted and any cash received in the year to 30 June has been logged. Then, reconcile all income receipts and payments to suppliers.

If you are registered for GST you will need to report your earnings, GST collected and GST paid at the end of the June quarter.

Cloud-based accounting software, like QuickBooks Self-Employed, easily connect to your bank, so you can track your finances, and categorise work and personal income and expenses. You can even create and send invoices, and follow up with customers when you see that an invoice has been viewed.

Keep an eye on your cash

As a sole trader, you are responsible for paying your own tax to the Australian Taxation Office (ATO). You can put money aside and pay a lump sum at the end of the year, or pay quarterly pay as you go (PAYG) instalments when you submit your BAS. Either way, monitor what income tax you’ll owe and keep it in a separate account.

If you can see that sending several invoices toward the end of June will put you into the next tax bracket, consider holding off until 1 July. You only pay tax on what you have earned not billed by 30 June.

Super troopers

Paying employee superannuation contributions is part and parcel when you’re a sole trader. You must comply with the super guarantee – that is, paying the minimum amount of super, which stands at 9.5%.

Paying your own superannuation contributions isn’t compulsory, but will help you save for retirement. If you do choose to pay your own super, record each payment so you can claim it back as a tax deduction.

Make your deductions count

There are many deductions you can claim for your business. What you can claim depends on what work you do. Tools or items you need to deliver a product or service are deductible. You can claim your motor vehicle, clothes, stationery and even make-up depending on the business you’re in. Office rent is claimable, and there are also deductions for those who work from home.

Small business owners can also claim an immediate deduction for any single item purchased for less than $20,000, like machinery or a new business vehicle, thanks to the current instant asset write-off rule.

Stay ahead of tax changes

The 2017 budget has unveiled changes sole traders should be aware of, and that will come into play from 1 July. The wage threshold for a higher education loan program (HELP) debt is lower, which could affect how your employees are paid. There’s also a new charge for employing anyone on a Working Holiday Visa, known as a 417 Visa, or a Work and Holiday Visa, known as a 462 Visa.

If you are registered for GST, the new Simpler BAS will affect how you report on GST. Changes to this reporting structure will take effect from 1 July, so if you use accounting software, make sure your provider is compliant and ready for the change.

Partnering with the right software provider can make preparing for the end of financial year as a sole trader a lot simpler. But if this is new territory for you, find an expert advisor you can trust.

To read more articles related to tax if you’re self-employed, visit here.

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