Tax help

[Righteous]

I'm hoping someone will be able to help me with this one.

Since moving on from my last job I have gone from being on a wage to working as a contractor for 2 companies. It's essentially a permanent gig, I'm just not an employee as such. So now I invoice 2 places on a weekly basis and have been putting money aside for tax but I was starting to get a little concerned that I wasn't putting in enough, to the point now where I think I have over compensated.

My question is, as a freelancer/subcontractor, is there a way I can pay the necessary tax on the go to the ATO? I would much rather do it that way rather than get a nasty surprise at the end of the financial year. Also, are there any tax breaks for freelancers? It's my only source of income, so it's not really considered a hobby, plus I would be earning way too much for it to be considered one.

I have got a bit of debt on the credit card so I have just been chucking tax money at that to save interest on the card which will save me a few hundred a year, but I don't know if that's really the smartest way to do it?

I should add, up to the end of October I was on a wage and they were taking tax out, so it's really only applicable to my income since that point.

Any thoughts/advice are welcome.

[Exar Kun]

PAYG can be done quarterly so it isn't quite as big a hit. You can get a form from the tax office to cover that. If you are contracting and using your own home/computer/internet connection etc then you can claim quite a few deductions - although I'm not sure how it works with things you've purchased before you started on PAYG. You'd be depreciating bigger assets over three years rather than writing them all off in one go. Best bet is to find a good tax accountant - pay them $100 at tax time and let them sort it out. As for figuring out how much to pay - you can use the basic calculator on the ATO website. If you extrapolate your weekly invoice amounts into an annual amount then you can see how much tax you should be paying on a yearly basis and then work that back to the weekly tax rate. You shouldn't pay too little tax by checking things out that way as it doesn't take into account deductions (although it also doesn't do share dividends etc if you have those so could be out there).

[ysu]

tax guys (accountant?) can help heaps.
I'm self employed, doing BAS (business activity statement) every quarter, paying an installment of tax+gst every time.
The tax guys prepare all the paperwork, and once at the end of the financial year again. Costs $260/yr for me in this format.

by the way GST is not necessary until you hit some 50k(?) per year. But there is a limit, above that you must charge (and pay) the gst.

[Righteous]

OK,

That makes sense. Pretty well what I found on the interweb. The only thing I hadn't heard of before was BAS.

I will most likely go over 50k but not this year as I have only been working freelance for part of the financial year.

[Hz-Lab]

hmm, while we are on this. I've been invoicing people without GST, I am not going to hit the 50k mark this year so i dont need to pay it, but should i be charging it just in case? And if i do charge it, and dont hit the mark, where should that GST money go?

[ysu]

If you charge GST, you must pay it to the tax office too. Otherwise you're basically cheating, which can bite you in the arse later, in the form of ugly penalties.

If you're below the boundary you *can* charge (and pay) gst, but you don't have to.
Although your clients will take you more seriously if you charge GST

If you hit the boundary mid-year (and you were reasonably sure you would not reach it) you just start charing (and paying) gst at that point. If you will likely reach it though, you should start charging instantly.

plus: I'm not sure if the boundary is in fact 50K, I seem to remember it was something in that region. Ask your accountant or read the ato website, I'm sure it's there somewhere.

Disclaimer; all of the above is what I remember, and my memory is not perfect. It's the usual crap, not to be taken as correct legal or financial advice ...

[macca]

I'm fairly certain that the GST threshhold was raised to $75K, I actually de-registered from paying GST (as my business is now a sideline since I started a salaried position) & my clients still take me seriously also, if you are not charging GST & your clients are benefiting from it then stick 5% on top, or 10% if you want for your pocket. As always check with your accountant or doctor