There are many benefits that come with running a small business in Australia. For one, you have full control in managing your sole proprietorship business, the flexibility to do the processes your way, and the freedom to make business decisions. However, one challenge that you have to deal with as a sole trader is filing taxes.
In this article, we’ll share how you can maximise your tax return as a sole trader:
- As a sole trader, you need a tax file number (TFN) and an Australian business number (ABN), which is similar to filing an annual individual income tax return. If you earn $75,000 or more each year, you have to register for goods and services tax (GST) and submit a business activity statement (BAS). During the filing process, you can lodge your returns online, accomplish it through a registered agent, or mail out a filled-out form
- It’s important to understand what the personal services income (PSI) entails. This involves individuals being paid for their personal efforts, skills, or expertise when rendering services, such as a copywriter, web designer, legal advisor, and management consultant. Check to see if the services you deliver based on skills or expertise can be classified under this income.
- As far as tax is concerned, one aspect you can take advantage of is a tax deduction. Yes, you can claim some deductions for the business expenses you incur as long as they are deemed assessable income.
- For proper tax filing, it all boils down to having proper bookkeeping and accounting, meaning that you should have detailed financial records throughout the year. Be sure to keep track of sales records, purchase and expense records, bank records, and payments to employees or contractors. When tax season comes, it’s easy to pull out all these records for the filling.
As a sole trader, a tax accountant can be smooth if you have sufficient knowledge. To make the most of your returns, be sure to know the basics, assess your PSI, consider some deductions, and practice proper accounting. Ultimately, it’s best to hire a professional accountant who can help manage your finances and taxes at the same time.