What tax deductions for freelancers can I claim?
- Home and office expenses: depending on what your freelancing business is, home expenses that are incurred while producing an income freelancing from home can be included.
- This can include running expenses apportioned to the space in which you work.
- Depreciation of assets used while producing work.
- Car expenses
- Superannuation contributions
- Mobile phone use
Other tax deductions for freelancers defined as earning Personal Service Income
If more than 50% of the income you earn from freelancing is from your knowledge, expertise, skills or labour then the ATO will define your freelance income as Personal Services Income (PSI).
This applies to most freelance work and means there are a few other items you might be eligible to claim. Examples of additional tax deductions for freelancers who earn PSI include:
- Advertising and quoting expenses
- Industry license and registration fees
- Banking and accounting fees
- Relevant insurance and liability fees
The need to keep receipts is imperative. This tip applies to any expense incurred while freelancing – from large expenses down to parking and coffee for meetings and even stationery. If you incur an expense that is directly connected to working as a freelancer, you can usually claim it – as long as it is purely for your business.
Keep separate bank accounts – including one for tax
This will make your life easier! Although freelancers are self-employed, by keeping your personal bank accounts different from your freelancing/professional income, you can easily see how much freelance revenue you earn, how much money you have for business expenses/bills and most importantly how profitable your freelancing activities are.
Take advantage of software
Use accounting software to keep track of incoming expenses and bills along with outgoing invoices. These processes will keep things organised and structured to ensure you’re on top of incoming and outgoing money.
Don’t forget Tax and GST
If you’ve just started freelancing, you might need to arrange quarterly pay-as-you-go payments to the ATO for your tax bill. Don’t get caught out come tax time with not having enough money to cover your tax bill and don’t forget that until you pay tax on your freelance income, that money isn’t all yours. You’ll also need to register for GST if your income from freelancing exceeds $75,000 a year.
Freelancing can be a rewarding experience for anyone who wants to be their own boss, though with it comes a greater responsibility to know the tax deductions for freelancers and the basic obligations to meet.
Talk to a professional
Talking to a professional tax agent like Etax Accountants, not only about tax deductions for freelancers, but also your reporting obligations to the ATO will help take the worry out of tax and also ensure you get it right the first time around. A simple motto when freelancing: “If you’re not sure, ask!”
Have a question or concern, give us a call on 1300 693 829 or email the team on [email protected].