Do freelancers need an ABN?
As the world gets smaller, more people work from home and employers outsource on a daily basis, and many tax questions come up. Our professional tax advisors here at Hillyer and Riches can answer these for you, but we’ve outlined a few important things you might want to know.
The concept of being your own boss, working your own hours and making all your own decisions may sound like a dream for some people. The freedom of freelancing does offer great benefits and flexibility. Freelancers have to be aware of their tax obligations and the taxman is straightforward about that.
If you choose to be a freelancer there are some steps you need to follow to ensure your tax compliance.
An ABN (Australian Business Number) is necessary, whether you are a marketing genius, a comedy writer or a professional consultant. You will still have the tax liability and potentially GST obligations. On a positive note, your clients will treat you like one of the big guys.
No ABN = 49% tax rate!
You can charge hourly or project based rates, but make sure to cover your tax costs in that fee. Employers won’t hire you without an ABN, and if they did they would be required to withhold 49% of your earnings and pay the tax office. An ABN will ensure you are taxed at the correct rate, and provide you with more opportunities..
If you make less than $75,000 per year you are not required to register for GST, but anything over that – you are required to. Depending on your situation it may be beneficial for you to register for GST, even if you are not required to. Talk to one of our tax professionals if you have any questions.
Claiming expenses and general tips
As a freelancer, you are allowed to claim expenses you incur while doing business. For example a writer can claim their laptop, new software or professional development courses. An artist could claim expenses for the tools they need such as paint, brushes, travel to and from workshops or art related books.
Make sure to:
- Keep your receipts for any work-related expenses.
- Keep a record of your expenditures. There are many free apps to assist you with this, but the ATO has this one you may want to check out. myDeductions
- Travel – if you travel less than 5,000km per year for work, you can claim a rebate based on cents-per-kilometre.
- Keep your invoices, quotes and paperwork in order. If you do get audited it will be much easier to provide the information needed.
- Get an accountant. Accounting fees are deductible and in the long run they will save you money.
Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.