Tax Tips and PSI: IT and Independent Contractors Tax Return Canberra
In today’s modern workplace, there are many ways for people to earn an income, including freelance and contracted work. If you are an IT Contractor, it is likely that you are either working for a payroll company or have a direct contract with a business. You might be operating under a Sole Trader, Partnership, Trust or Company structure, which affects how you lodge your tax return. To help you manage and process your tax, our IT and Independent Contractors Tax Return Canberra Accountants can assist you this End of Financial Year.
When it comes to Tax Time, it is important to be aware of several taxation considerations, so that you don’t attract unwarranted attention from the Australian Taxation Office (ATO). There are special tax rules for IT and independent contractors to ensure that tax obligations are not avoided through the use of business structures.
Contractors need to be particularly aware of Personal Services Income (PSI) and how this can affect their taxable income and deductions. Details on PSI income can be found at the ATO website.
If you are a Sole Trader, you can claim certain expenses as tax deductions, but they need to be directly incurred as a necessity for earning your income. This means that you could not have completed your job without a certain item or expense. However, under a Partnership you can claim a range of deductions and the PSI rules may affect the allocation of income and expenses between the partners. If you receive PSI, you might not be eligible for the Small Business Tax Offset, which can reduce the tax you pay by $1,000 each year.
PSI rules may cause income to flow out of a company or trust to employees and office holders. This can in circumstances negate the benefit of operating a company or trust and leave you with a large personal tax bill. There may also be situations where there is no benefit from the $20,000 instant asset write off.
A common mistake made by IT and Independent Contractors is to forget to put aside PAYG income, which can impact significantly on your business. After your first tax return, you may find yourself being sent instalment activity statements with quarterly PAYG instalments. These are generally paid by independent contractors who earn a certain amount of income.
If you are a contractor, you are not required to make a superannuation contributions. However, if you do make contributions there are specific notifications you are required to make prior to lodging your tax return in order to claim these as a deduction, such as the Notice of Intent to Claim or Vary a Deduction for Personal Superannuation Contributions form on the ATO website. A link to the website can be found at the ATO website.
If you are a sole trader you don’t have to get your own tax file number. However, you will need to have an ABN to use with dealing with other businesses. If you don’t they can withhold 49% of payments.
At MAS Tax Accountants Canberra, we have experience helping IT and Independent Contractors sort out and manage their tax affairs. Our IT and Independent Contractors Tax Return Canberra specialist services are reliable, accurate and on-time, meaning that you will have less to worry about this Tax Season. We can also help with a range of other services such as accounting software.
Learn more about our Canberra office, including the Tax, Accounting and Business Services that we provide.
For more information or to make an appointment, please contact us below or call us on 1300 627 829
