Let’s talk about tax
Tax. One of the most important aspects of a sole trader’s life, but also one of the most confusing, overwhelming and kinda scary. There’s taxable income, GST, PAYG, BAS…
Hold tight – our resident accountants have made it easier to digest with these bite-sized info-nuggets. (yum)
As a sole trader, you are still paying the same amount of tax as you did in your full-time gig, it’s just that now it’s not taken out of your weekly paycheck – you are responsible for managing it. To figure out the exact amount, you can use these tools from the ATO.
Your taxable income is the difference between your accessible income and your deductions: accessible income being the money you make in the financial year, and the deductions being your expenses.
Taxable income = accessible income – allowable deductions.
This tool will help you to calculate the amount of tax you are liable to pay for a given financial year.
INCOME AND EXPENSES
In order to work out how much tax you need to pay, you need to know how much money you are actually bringing in. Tracking your income and expenses is no longer optional. Do it old school with a shoebox and an excel spreadsheet, or fast-forward into 2020 with Sole. For your expenses, all you need to do is take a picture of your receipt, upload the details and Sole will take care of the rest.
GST – a 10% tax placed on most goods and services sold in Australia. If your annual turnover is $75,000 or more, you’ll have to register for GST and pay it. If you’re not sure if your business is going to make that much money, it’s optional to register—but watch your turnover, you’ll need to register when your turnover is $75,000 or more.
If you registered for GST you will need to lodge a business activity statement (BAS) to the ATO each quarter. Your BAS will help you report and pay your GST, PAYG, PAYG withhold tax and other taxes. If you want to get into the nitty-gritty, the ATO has a wealth of information available here.
Rather than being hit with a soul-crushing tax bill when you lodge your tax return, you can opt for PAYG (pay-as-you go) instalments during the year – normally quarterly. You can use the ATO’s PAYG instalment calculator to estimate how much tax you’ll have to pay.
Want to know more? (who wouldn’t?) For more tax tips check out our gram. Send us a DM. Post us a letter.