Sole traders in Australia often get butterflies in their stomachs when the tax time nears. Right from the lodgement of Sole Trader Tax Return to that of paying a lump sum tax bill, the tasks are aplenty. However, you will be happy to know that you can reduce this astronomical tax bill by making certain claims from the Australian Taxation Office. Aside, there are also some tax tips that as a sole trader will help you to remain tax-compliant to the Taxation Office of Australia throughout the year.
Useful Tax Tips For Sole Traders In Australia
The end of a financial year in Australia should not be a daunting time for you at all. Instead, with some quick tips, you can turn that frantic time-frame into a gleeful phase. Here are some effective tax tips for sole traders like you in Australia.
1. Prioritize The Small Business Restructure Rollover
The small business restructures rollover lets, sole traders, to transfer their potential assets to another entity. These assets conventionally include the following
- Depreciating assets
- Revenue assets
- Trading stock
- CGT assets and
- The business itself
As a sole trader, you can transfer these assets to a Company or Unit Trust devoid of any income tax obligations. This approach lets you shift to a new business structure that is more compatible according to your present business situation.
2. Consider The Start-up Costs Which Are Instantly Deductible
The ATO had introduced fresh rules for small businesses until recently. According to these rules and regulations, small businesses can now deduct certain start-up costs effectively. These start-up costs were earlier supposed to be spent over a duration of five years. Small businesses with a turnover of less than ten million AUD will be able to claim these expenses. These expenses include the following:
- Payment made to a governmental agency in the form of charges, taxes, or that of fees. These costs again should pertain solely to the establishment or the formation of your business.
- Fees were paid to competent professionals in order to glean services or advice. These advices and services should again pertain to the pertinent operation or structure of your business.
If you feel that you cannot claim these expenses on your own, then, it is always advisable to seek the assistance of a pro. A registered sole trader tax accountant will evaluate your potential circumstances first. Subsequently, he or she will help you to deduct the expenses which you are eligible to deduct immediately.
3. Optimize Your Income Protection Insurance
As a sole trader, substantial income protection insurance is mandatory for you to obtain. This is because you operate the business on your own, complete all the tasks and generate the revenue earned. Income protection insurance will cover your potential income, in case you cannot work for an extended time-frame. The best part is the comprehensive cost of your insurance can now be deducted from your income tax return.
4. Ensure Your Sole Proprietorship
It is imperative to establish that you are a sole trader first. The tax obligations which you are supposed to meet will only become clear after that. A sole proprietor is not confined to any specific sector in Australia. Make sure that you are running your own business followed by its effective operation. Since you are not established as a legal entity, you are liable for any potential legal or financial obligations incurred. Another thing to ascertain is that no companies should withhold your pertinent taxes.
The Benefits Of Being A Sole Proprietor
The greatest advantage of operating as a sole trader is the least complexity of business operation which it offers. To be precise, it’s the easiest form of company to start with. You just need that zeal in you with the relevant set of skills and knowledge. Some common examples of a sole proprietorship business include the following:
- Lawn company or landscaping
- Graphic design
- Freelance writing or
- Computer repair services
As a sole trader, it’s equally important that you meet your tax obligations properly. The best way to pay your sole proprietor tax is by visiting the official site of the Australian Taxation Office (ATO). Subsequently, you need to pay your sole proprietor taxes electronically. You can use a credit card, debit card or even your bank account to pay your potential taxes to the ATO.
Potential Deductions For Sole Traders In Australia
As a sole trader, you can claim certain expenses in your personal tax return. These chiefly include costs that are directly related to earning the assessable income of your business and its operation. According to the protocol laid out by the Australian Taxation Office, you can claim any of the following operating costs.
- Tax preparation cost
- Maintenance and repair costs
- Potential bills of telephone
- All your pertinent professional memberships
- Costs pertaining to education and training
- The various potential expenses pertaining to business travel
- Business motor vehicle costs
- All your banking charges
- All your potential home office costs
- Bad debts which comprise an imperative part of your business and
- Advertising costs
Remember, that you can claim the aforesaid costs in the year in which they were incurred.
Depreciation Incurred Upon Capital Expenses
Depreciation incurred upon capital costs is costs with a longer lifespan as compared to others. These costs can be claimed over multiple years which include the following instances:
- Costs pertaining to equipment and plants
- Expenses related to motor vehicles
- The potential costs of furnishings which were required to run your business effectively
- Electrical components and the potential costs pertaining to them and
- All the pertinent costs incurred on all the computers used for the sake of your business.
Other than these expenses, there are a couple of other expenses as well which you can claim as a sole proprietor. These include certain occupy costs, internet, and phone costs and car expenses, etc. Hire a tax accountant in Perth to claim the said deductions perfectly. Aside, providing you premium tax return services your tax agent will also assist you to lodge your sole trader tax return Perth with flying colours.