Self-Employed? Keep Your Tax and Expenses Under Control

Working for Yourself Means Wearing a Lot of Hats

Being self-employed gives you independence and flexibility, but it also means taking responsibility for parts of the business an employer would normally handle for you.

You're not just doing the work.

You're also managing invoicing, expenses, cash flow, record keeping and tax.

Putting good financial habits in place early can save considerable time and stress later.

Understand What You Can Claim

One of the first things to understand is which business expenses may be tax deductible.

Knowing this helps you keep the appropriate receipts and records from the beginning rather than trying to reconstruct everything at tax time.

The deductions available will depend on your individual circumstances, how you work and the nature of your business.

That's why it's worth discussing your likely business expenses early, particularly if you're considering larger work-related purchases.

Get a Good System in Place

You don't need to make your accounting complicated.

But you do need a system.

Keeping invoices, receipts, expenses and customer payments properly recorded gives you a much clearer picture of how your business is performing.

It also means less time searching through emails, bank statements and receipts when your BAS or tax return is due.

For contractors and professionals who charge for their time, software that integrates time tracking and invoicing can also make billing faster and more accurate.

Don't Treat Every Dollar as Yours to Spend

This is one of the biggest adjustments when moving from employment to self employment.

The money arriving in your business bank account isn't necessarily all available for personal spending.

Some of it may ultimately need to cover tax and other business obligations.

Regularly putting money aside for these liabilities can help ensure you have sufficient cash available when payment dates arrive.

Depending on your circumstances, regular tax instalments may also help spread the cost throughout the year.

Separate Business and Personal Finances

Keeping separate business and personal bank accounts can make managing your finances significantly easier.

It provides a clearer record of business income and expenses and helps prevent business revenue from being mistaken for personal spending money.

Some self-employed business owners also find it useful to establish a regular amount they draw from the business for personal expenses rather than taking money out whenever it becomes available.

Remember the Quiet Periods

Employees generally continue receiving their salary while taking annual leave.

For many self-employed people, taking time off means income stops as well.

Your cash flow planning should therefore consider holidays, illness, seasonal fluctuations and other periods where revenue may be lower than usual.

Building an appropriate cash reserve can provide some breathing room when those periods arrive.

Good Systems Give You More Time for Your Business

Financial administration shouldn't take over your working week.

With the right systems in place, you can keep track of expenses, understand your tax position and manage cash flow without spending unnecessary hours on administration.

At Lockwood & Ward, we help contractors, freelancers and small business owners establish practical accounting and tax systems that make managing their finances easier.

If you're working for yourself and want to get your financial systems in order, speak to our team.

Lockwood and Ward Pty Limited | ABN 76 113 938 373

Level 9, 50 Clarence Street, Sydney NSW 2000 | Tel: (02) 9299 7044