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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’. It was hard to learn how to do my own book-keeping and work with accountants to lodge my tax returns but I managed to – and if I can do it, anyone can.

If you too are numerically challenged and feeling daunted by book keeping, tax returns or meetings with your accountant, read on.

Make sure you have the right accountant for you

Some freelancers and contractors and sole trader businesses complete their own tax returns. However, if you are anything like me (hopeless at maths), you’ll need an accountant to complete your tax returns. If you already have an accountant whom you trust and is doing a good job, stick with them. If you’re not 100% happy with them, I recommend you find an accountant to whom you have been referred by people you trust.

Don’t be afraid to ask your accountant for a quote prior to them completing your tax return although be prepared: they may not be able to give you a quote before completing at least part of the work.

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, or your book-keeping is sloppy and the accountant has to fix it up, or 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.
  • Send your accountant your book-keeping program files (e.g. I send my accountant a portable Quickbooks file).
  • Collect together your hardcopy bank statements, copies of your BASs, Superannuation and 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 lpossible the accountant will find something that needs to be fixed, updated or improved, so they may have some tasks for you to do.  But ultimately, they’ll give you the tax return for sign-off then lodge it for you.

When should you complete your tax return

I always try to get my tax return completed and finalised as early as possible after each financial year.

The advantage to completing your tax return in July or August is:

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

If you owe the ATO

If you know it will be hard to pay the ATO on time, you can usually negotiate a longer deadline for payment with the ATO. ATO staff are generally very friendly and welcoming, even when you are ringing them up to ask for more time to pay your bills. If don’t let the ATO know you are having difficulties and don’t pay on time, they will not be so nice. So if you are a bit tight for money, give the ATO a call at the outset. The ATO is the sort of agency you want to stay friends with.

Image: Copyright SW Kane


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