If you’re one of the two million or so self-employed Australians out there1 , you’ll know how time-consuming the end of the financial year (EOFY) can be. So the earlier you get organised, the easier it will be when tax time comes around.
1. Understand what you can claim
As a self-employed person, you can claim expenses that many employees can’t. However, they must be bona fide business expenses — and you’ll need the receipts and paper work to prove it.
For example, you can claim:
Petrol — but only for work-related travel, and you’ll need to keep a logbook.
Travel expenses — but you’ll need receipts, and the trip needs to be genuinely for business (and for more than one day).
2. Top up your super
According to the Australian Super Funds Association (AFSA), in 2012 nearly 25% of self-employed Australians had no super whatsoever2 . This could lead many to suffer financial hardship in retirement.
So make sure you make contributions yourself. You can contribute up to $30,000 (or $35,000 if you were aged 49 or older from June 30, 2014)3. Remember, if you’re self-employed, you may be able to claim all your super contributions at tax-time — but do it before the end of the financial year.
3. Protect your income (it’s tax effective)
If you work for yourself, you’re not entitled to Workers Compensation. So it’s worth taking out income protection insurance to protect your income from the risk that illness or injury may put you out of action for a while.
Generally, the premiums are tax-deductible, making them more affordable. You may also be able to buy income protection insurance (and life insurance) through your super fund.
Advice can help
Running your own business, while rewarding, can be time consuming and complex — so it makes good business sense to get advice.
1. Independent Contractors, Independent Contractors: How Many? (Australia), November 2013 and Australian Bureau of Statistics 6359.0 – Forms of Employment, Australia, November 2013
2. ASIC, Smart Money, Self Employed People, January 2015
3. ATO, Concessional contributions cap, December 2014
This document contains general information only. Mentor1 is not a registered tax agent. If you wish to rely on this letter to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, Mentor1 did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 20 March 2015.