Tips for tax return time: freelancers, sole trader businesses

Sally-Anne Watson Kane . Sunday, June 12, 2016 . Comments
Tips for tax return time: freelancers, sole trader businesses

Are you a freelancer, contractor or sole trader business? Do you start to stress as the calendar creeps closer and closer to tax time? I am what they call 'numerically-challenged'; i.e. I'm a real dummy when it comes to book-keeping, tax returns, anything to do with numbers. However, even I am now able to do my own book-keeping and make sure my tax returns are lodged on time and if I can do it, anyone can. If you are feeling daunted by the idea of organising your tax return and meeting with your accountant, read on.

Make sure you have the right accountant

Some freelancers and contractors and sole trader businesses complete their own tax returns. However, if you are anything like me (i.e. pretty hopeless at maths and don't know much about tax), you'll need to pay an accountant to complete your tax returns for you.

If you already have an accountant whom you trust and seems to be doing a good job, stick with them. If you're not 100% happy with your accountant, find another one.

When choosing an accountant, look for someone you think you can work with, who is going to do a good job and who has been recommended by others, and meet up with them before deciding whether they are right for you. I prefer the type of accountant who is a stickler for the rules because I'd rather stay clear of any 'grey areas' when it comes to claiming expenses and paying tax. That way, if the tax office ever decides to audit me, they will discover that I have always done the right thing.

If you feel the quote is too high, get a quote from another accountant so you can compare the charges, bearing in mind that the less expensive accountant may not be the best one.

Don't be afraid to ask your accountant for a quote prior to them completing your tax return, and don't assume your accountant will charge you the same every year. As a general rule, if you're organised, have done your book-keeping correctly and your tax return is relatively simple, you'll be charged less. If you're disorganised, your book-keeping has holes all over the place that the accountant has to fix up, and your tax return is more complex, you'll be charged more. 

Completing your tax return

If you're using an accountant to complete your tax return, at the end of the financial year you need to:

  • Make sure your book-keeping is up-to-date and on a program that your accountant is able to work with.
  • If you are GST-registered, make sure all your quarterly BASs have been lodged and your BAS bills paid.
  • Collect together all your bank statements, copies of your BASs, and any other relevant documents.
  • Meet with your accountant. They will tell you if there are any other documents you need to obtain.

Hopefully, your book-keeping has all been completed on a suitable accounting program and there are few mistakes. Even so, it's likely that the accountant will find something that needs to be fixed, something you've forgotten, or something that has to be updated or improved, so after meeting them there's usually a bit more work involved before the job is done and the tax return lodged.

The accountant will usually be able to give you a pretty good idea of whether you'll be receiving a bill or a payment from the tax office. This will be confirmed later by the ATO.

When should you complete your tax return

I find the very idea of working with accountants and completing tax returns pretty stressful. The longer I leave it the more stressful it becomes. So I always try to get my tax return completed and finalised as early as possible after each financial year. In my line of business (online transcription, business writing and editing) there is usually a bit of a lull in July so July is a good month for me to spend that extra time needed to get my book-keeping up to date, gather all the documents I need to present to the accountant, meet with the accountant and do any follow-up they ask me to do. That is, doing it in the quietish month of July is less costly to my business than, say, completing my tax return in September or October which are always busy months.

Not all businesses have a slow patch in July so it might not matter to them whether they complete their tax return in July, August or September. But there is another advantage to completing your tax return asap:

  • if you do get a large bill from the ATO, you will have a few months to pay it; whereas if you don't find about the tax you owe them until later in the year, you might find it harder to pay on time; or
  • if the ATO owes you money, then the sooner you lodge your tax return the sooner you'll be paid.

If you owe the ATO

Once your tax return has been lodged, you'll either receive your payment from the tax office (yay!) or pay the tax office (ouch!) and, of course, you'll also need to pay your accountant (meh...).

If you owe the tax office money and are going to find it hard to pay them on time, you can usually negotiate a longer deadline for payment with the tax office who you will find are very nice people to deal with. If you are finding it hard to pay but don't let the ATO know, and don't pay on time, they will not be nice about it at all. So if you are a bit tight for money and need extra time to pay, give the ATO a call and sort it out amicably. They are the sort of people you want to stay friends with.

This article is based on my own experiences since starting On Time Typing as a small (sole trader) online/onsite scribing business in 2002 which has become an online transcription, scribing, writing, editing and proofreading business.

Stay posted for future articles about book-keeping, BAS statements, tax and managing an online business.


Copyright Sally-Anne Watson Kane, On Time Typing. Please seek my permission prior to reproducing this article in any way but feel free to link directly to this page if you wish to use this content - thanks!


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