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What To Know About Super For The Self-Employed

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What To Know About Super For The Self Employed
What To Know About Super For The Self Employed

If you’re self-employed, you aren’t required to pay yourself super guarantee payments. It is however a recommended way to save for your retirement, and making personal super contributions could be beneficial for you in the long run.

As a self-employed individual, you can make regular or lump-sum payments to your super, potentially claim a tax deduction on contributions, and may be able to save tax later on.

If you’re looking to start paying contributions to a super fund you already have, always check that you can make those contributions to it if you are self-employed. Your fund will also need your tax file number (TFN) to accept those contributions. If you don’t provide your fund with your TFN:

  • Your super contributions will be taxed an additional 34%
  • Any personal contributions that you try to include in your fund will not be accepted, which may mean you miss out on super co-contributions you’re eligible for.
  • It will be harder for you to keep track of your super.

There are two ways to make contributions to your fund if you are self-employed, depending on how you pay yourself. If you receive a wage, you can set up a regular transfer into super from your before-tax income, or if you receive income from business revenue, you can transfer a lump sum when you have enough cash flow.

Employers contribute at least 9.5% of their employee’s earnings to their super fund. As a self-employed person, bear in mind that there are limits to how much you can contribute each financial year. These are:

  • Up to $25, 000 in concessional contributions (from pre-tax income, which you can claim a deduction on).
  • Up to $100, 000 in non-concessional contributions (from your after-tax income or savings).

You may also be eligible for co-contributions to your super from the government if you are considered low-income. Discussing your options for your super with an accountant or financial advisor is highly encouraged and will ensure that you don’t miss out on that potential capital growth.

How To Maximise Tax Returns On The Side Hustle

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How To Maximise Tax Returns On The Side Hustle
How To Maximise Tax Returns On The Side Hustle

If you or someone that you know began a side business (or “side hustle”) during the last financial year, you would have to meet the tax obligations that come with that business, along with the tax obligations of your primary business.

All income earned through a side business is taxable income. That means that every sale you make will count towards your taxable turnover (the total business income from your sales) and will need to be declared on your income tax return. Additionally, suppose your turnover exceeds or looks like it will exceed $75, 000. In that case, you’ll have to register for GST and incur the 10% tax that’ll be added onto all of your taxable sales, payable to the ATO every quarter.

If you have to spend money on purchases or expenses that relate to the side business, that spending can be deducted from the profits that you make. Essentially, you only need to pay tax on the difference between your income and your deductions. Here are a few things to keep in mind when claiming a deduction for your business.

  • The expense that you are claiming has to have been incurred by the business.
  • The expense must relate to the business and can’t be something like your weekly groceries (domestic or private in nature expenses are generally not eligible for claiming).
  • If an expense has been incurred that is partly private/domestic, and partly for business, that expense will need to be appropriately divided. This is especially useful if you run your side business from home and claim home office costs.
  • Always ensure that your records are being kept and that there is evidence that it was the business that spent the money. An invoice or a receipt is sufficient evidence in this case, but a bank or credit card statement may also be used.

Other deductible expenses can happen during the initial startup and structuring of the business. These deductions can include costs that occurred when seeking professional advice on structuring the business, researching the business’s viability or when developing a business plan.

A few items you might be eligible to claim for your side business include:

  • If the business is being run from home, the business portions of bills like utility, phone or internet can be claimed.
  • Skilling up for the business or reskilling may be tax-deductible when it comes to the cost of courses, training, seminars or conferences (as long as it links to business income).
  • Any prep work that occurred during the business startup before the business’ official start can be claimed by the business.

Always ensure that you claim all business expenses that could apply to your business.

Good record keeping will help track all income and potential deductions that come through via the side business, and employing a bookkeeper could be a means of ensuring that this happens correctly. Remember that accountants are always here to help you during tax return time as well.

Effective Money Management With a Budget

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Effective Money Management With a Budget
Effective Money Management With a Budget

Every little bit of money counts in today’s economic climate, and for many, it’s about making what they have, work for what it is that they need.

Money management is an important skill to learn as it helps boost finances with very simple steps. Money management can ease the stress and financial worries of people as it allows for more transparency and control over where funds may be going and can erase unnecessary spending.

An easy way to self-manage money is by implementing a budget to use available funds on. There is no right or wrong way to budget, as it is up to personal preference and responsibility on how and where money needs to be spent. A budget should account for unexpected expenses, expected expenses, and saving money.

A budget might include or cover:

  • Rent or mortgage payments
  • Food
  • Savings (a recommended amount that should be put aside is 15% of gross income)
  • Insurances (car, health, pet, etc.)
  • Unexpected expenses / an emergency fund]
  • Gifts (ie. birthdays, holidays, etc.)
  • Holidays

There should always be a reason to create a budget. This reason may be a goal, an approach, or to be able to pay off a debt – by knowing the why behind it, it can be easier to stick to a budget. It is also important to actually put the budget into action and implement it.

An effective budgeting strategy is to set aside savings as soon as possible, which reduces the risk of spending that money. This strategy can also be used to help pay off debts or loans.

Splitting large expenses that arrive at certain times of the year over the course of several months can help minimise the amount required as a lump sum at the time that payment is due.

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