“Time for sex?” Sorry, I meant, “Time for tax?”
It’s amazing how changing a few letters can turn someone’s attention span off or on. Eeewww, TAX. There may be no bigger turn off.
But as a freelancer, you’re tasked with looking after your own tax, and given it’s tax time here in Australia I thought I’d share a few of the simple systems I set up when I started working for myself. These simple steps ensure I don’t curl up under my desk every year at tax time hiding from the ATO. Instead, I dance on top of it shouting, “Tax time, woooee!” Nope, not true either. But who knows what may happen in the future?
(Disclaimer: Cause I’m pretty sure if I’m even touching the topic of finances, I should write one. Something about how I’m not an accountant, so I can’t give you financial advice. And how I’m not a tax adviser, so I can’t give you tax advice. Consider yourselves advised. This is only general advice. I don’t know anything much. That’s why, as you’ll see below, I hire experts for the hard bits. You should too.)
5 steps to freelancer writers making tax time (virtually) stress-free.
1. Get an ABN
If you have any inclination of working for yourself in Australia, you need an ABN (Australian Business Number). Get one here. I got mine so long ago I don’t have a lot more tell you about the process other than it’s easy, and it’s free, and you 100 per cent will need this as a freelancer. No magazine or newspaper can pay you without one, unless they withhold about 48% plus of your pay back for the tax office. You don’t want that. Also, the people holding the purse strings will be confused at your lack of an ABN. It smacks of ‘beginner’. Possibly, the corporate machinery aiming to pay you will literally seize up. Invoices will get spat back from ‘no reply’ emails, and your payment will be stuck in limbo. Just get an ABN. Free. Easy.
(A note about GST – don’t register unless you need to. Do you need to? Probably not, if you’re just starting out – but what do I know? Ask your accountant.)
2. Set up a few tax havens.
No, not offshore accounts, just special bank accounts for your tax savings. I have one account only for my PAYG tax, and every time money comes in, 30 per cent of it goes straight into my tax account. I know, soooo boring. But wait, it’s about to get more boring, because I then have a different account for my GST money, and another 10 per cent gets whisked off into that. (Pretty sure your bank will give you a fee free account for this purpose if you ask.)
Hey – is that you yawning? This is important stuff. Do I have to reel you in with “Time for sex?” again? Honestly, this boring business pays off; it’s what saves me from being stressed out when the ATO comes knocking and asking for its cash.
3. Be religious.
About anything you want. But mostly, be religious about moving your hard-earned money into your specially allocated bank accounts. I try to make it easy to put money in to those accounts, but hard to take money out. This just makes it less likely my tax money will get spent on dinners out, home interiors and any of my other current weak points.
4. Start tracking your money in and out.
Yes, this is formally called a profit and loss. I call it, “That excel spreadsheet where I track my income and expenses”. Cause it’s catchier. No, because I just really like this stuff to be simple. So simple. No MYOB. No bookkeeping programs. I keep receipts for all my business expenses, put them in a little folder, and every quarter I get a bookkeeping type person to enter them into the excel spreadsheet thingy so we can do my BAS (Business Activity Statement), which tells the ATO what I’ve earned that quarter.
(I know what you’re thinking: “What can I claim, Sue?” And I know you know the answer: “Don’t ask me, ask your…yes, accountant!” Oh, you weren’t thinking that? You were thinking: “Do I have to do a BAS every quarter Sue?” Answer: “I don’t know, but I suspect not for a while – ask the nice folks at the ATO after you’ve gotten your ABN.”)
5. Get a good accountant.
You’ve got one right? If not, you are CRAZY. Get one now. Even if you’re just starting out. ESPECIALLY if you’re just starting out. If you are self employed, never do your own tax again! (Unless, of course, you are a self employed accountant.)
The ATO is always changing its rules on what you can and can’t do as a self employed person. Guess what? I don’t need to care! All I need to do is go to my accountant every year and he’ll tell me what’s changed. Like a nerdy-swot I like to do this in July, as soon as possible after the end of the Australian financial year. Mainly that’s because if I owe more than I thought, I want to know in advance – you don’t have to pay tax till when is it – March? – ages anyway, but nonetheless, I want time to save up if there’s been a big problem. Also, I like to tick the task off my “to do” list (told you, nerdy swot).
See how I’m not asking you a question to encourage you to comment this week? That’s only so you don’t ask me financial questions, because *drum roll*: “I’m not an accountant!” But of course, I’d love you to comment – why not share anything that’s worked for you in getting your freelance finances set up?