EOFY for freelancers: Tax return must-knows

Freelancer on phone with laptop sorting out finances at tax time.

The last 12 months have been a wild ride for many working in the gig economy. Whether you were an established freelancer or took up a side hustle during lockdown, you’ve likely experienced some major ups and downs over the last year of economic uncertainty.

But as one of the only two certain things in life, taxes can’t be ignored among the turbulence. 

We’re once again approaching the end of the financial year, and no matter your experience with business banking, a quick refresher on what you need to remember for your tax return as a freelancer or contractor could be helpful.

So before you hit the accountancy books, ask yourself the questions below and ensure you’ve got accurate answers locked and loaded for tax time.

What kind of business are you running?

While not every dollar you acquire is taxable – you don’t need to declare the $80 you sold your pushbike for on ebay – if you’re operating like a business and making a profit, you’ll need to be registered as such and declare the earnings for tax purposes.

If you’ve been doing this kind of moving and shaking in the business realm, you’re probably already aware you need an ABN (Australian Business Number) to operate. When you register for an ABN, you’re asked if you want to operate as a sole trader or company. 

There are heaps of details in the fine print about the differences between a sole trader and company and how these entities run. But the main point to remember in regards to tax is that sole traders include their earnings in their personal returns under a business item, whereas people running a company must lodge a completely separate tax return for the company.

How much are you earning and are you registered for GTS?

If you’re juggling multiple freelance gigs or a full-time job plus a side-hustle, the combined earnings from all of these could push you into a higher tax bracket. You’ll want to be prepared for this in case you were anticipating money back on your return and end up having to pay tax since you didn’t have an employee setting aside pay-as-you-go (PAYG) tax contributions.

How much you earn is also tied to GTS. The 10% Goods and Services Tax (GST) that’s charged on most items and services in Australia will be applicable to your business if you earn more than $75,000 a year (before tax).

You’ll need to register for GST separately after taking out an ABN. If you didn’t do this initially and your side-gig has transformed into a full-blown business making more than the GST threshold, there are a few steps you can take. 

If you’ve just approached the threshold for the financial year, you can go ahead and register now. However, if you started making more than $75,000 a while back, you may have to pay GST on sales you have made since the date you were required to register. This could be a hefty bill, especially if you haven’t been charging the additional 10% GST on those sales.

What tax deductions can you claim as a freelancer?

Like any other job, there are a number of business-related activities and purchases you can claim as tax deductions. This can include travel or vehicle expenses, home office equipment and even advertising for your businesses.

Just keep in mind, like standard employees, you can only claim on expenses incurred while you were working, which may only be a portion of your use of the item or service. Basically, if you use your car for fun as well as business, you can’t go claiming a year’s worth of petrol on tax.

The best way to ensure you get the most out of your return is to keep accurate records of any work-related expenses. The Australian Taxation Office (ATO) has a handy tool to help you do this throughout the year. The myDeductions tool in the ATO app lets you keep records and photos of expenses and invoices all in one place. 

When lodging your tax return through myGov, you simply upload them with one click and it should pre-fill the return with all your expenses.

Have you received any government wage subsidies?

Wondering if wage subsidies are taxable income? The answer is yes.

JobKeeper ceased in April 2021, but if you received this subsidy at any point over the last 12 months as an employee or sole trader, this should be included in your tax return. Since these payments went through businesses to support employee or contractor wages, it should be automatically included as your income.

The same goes for JobSeeker, which was doubled during 2020 and then continued at a marginally increased level from April 2021. If you received this income support, it should also appear on your tax return automatically as your ATO account is linked with your government payments information from Services Australia.

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