How much tax do I need to pay as a freelancer?
Let’s say you’re a freelance photographer and you’ve been tasked with photographing a footy game. You wouldn’t leave at half-time and say “oh well that’s basically enough I’m going home now”.
It almost definitely is not enough – it’s only half the job!
People year in, year out, have the same approach to their Tax Return and they don’t claim everything they’re entitled to.
By leaving half of your tax deductions unclaimed, you’re only doing half a job.
If you’re a freelancer, make sure you don’t forget to claim all of your tax deductions. In this article we are going to discuss everything you need to know as a freelancer in order to claim everything you’re entitled to.
What qualifies your tax deduction?
There are only three main requirements that qualify as an expense for tax deductions, which is calculated against your income:
- You must have spent the money and not have been reimbursed
- It must be related to your job
- You must have a record to prove it
What constitutes an expense as “related” to your job you might ask?
Here’s a definition of your taxable income, and a list of freelancer work tax deductions.
What makes an expense related to your work?
For an expense to be directly related to your job, it has to be directly related to your ability to generate income. The best way for us to explain this is with an example:
If you are a freelance photographer, the purchase of your camera will be an expense directly relating to your income because it would be impossible to do the job without it.
However, if you work in an office and you like to dress in expensive clothes, your purchase of expensive clothes will not be an expense directly relating to your income, because you can still do your job without the expensive clothes.
See the difference?
If you’re unsure, One Click Life’s easy-to-use platform will help you qualify your deductions – along with some help from our qualified tax team.
What is your taxable income
Your taxable income is money generated from your employer or your work. Your taxable income also includes:
- PAYG summaries
- Pensions and government allowances
- Interest earned (banks etc)
- Rental property income
- Business income
- Other income earned (capital gains etc)
Tax deductible expenses for freelancers
- Buying work clothes/uniforms (if required to wear them and they have a logo)
- The cost to laundry clothes/uniforms
- Protective clothing items for your freelancing work
- Sun protection if your freelance work is outdoors (hats, sunglasses, sun cream)
- Purchase of equipment and tools up to $300
- Depreciation expense of equipment and tools over $300
- The repair and/or upkeep of tools and equipment for your freelancing work
- Home office expenses (if needed/able to work from home)
- Interest generated from loans relating to work activities
- Self-education and courses if they are related to your freelancing work
- Licences and certificates relating to your freelancing work
- Fees from joining a union/other similar organisations
- Subscriptions and magazines relating to your freelancing work
- Travel expenses if work related
- Car expense claim for kms travelled to jobs
Working from home expenses
As a freelancer, you probably don’t have a regular office space outside of your home. This means that you will be entitled to working from home tax deductions. Trying to work out exactly what you can deduct while working from home is difficult, so use our easy-to-use platform and get your tax return finished in minutes.
Equipment and tools
The equipment you buy that is related to your freelance work is able to be claimed as a tax deduction. If the purchase was less than $300, then you can claim the flat cost of the item. If the purchase was more than $300, then you can claim the depreciation expense of the item.
If you need to get this equipment serviced or repaired, you can also claim that cost as a tax deduction.
If you’re a freelancer, you may have to buy protective clothing in order to do your job. Usually if you work for a company you’ll be supplied with your protective clothing/equipment, but if you aren’t and you buy the clothing yourself, you can claim the purchase as a tax deduction.
If you need a hand deducting this, make sure you get the help from someone that knows what they’re doing.
- Car expenses and general wear if your car use is work related (estimated Km or a logbook with all expense items)
- Travel expenses for your work (flights, taxis and trains etc)
- Accommodation needed for work reasons (including meals)
- Work phone bills
- Work related computing
- Work from home costs
- Tax return fees dating to the year previous
- Rental expense (if you are renting)
- Charity donations and gifts
- Sun protection (if you have to work outside)
A tax tip for freelancers
Unlike most people, as a freelancer you don’t have an employer that will withhold your tax out of your pay check. This means you may get a nasty surprise come tax time and have to pay the ATO.
What are you going to do if you don’t have any money?
That’s why we recommend using this tip: Every time you receive a paycheck, the first thing you should do is put a percentage of that money away in a savings account. At the end of the year you should have saved up enough to pay off your tax bill.
Maximising your tax return with an online tax agent
There will be more tax tips and deductions for Australian freelancers that aren’t on this list. Tax deductions are not only industry specific, but also change from individual to individual.
The best way to claim the most you can (which will maximise your money) is with One Click Life.
The more you deduct, the less tax you pay and the more money you can spend on yourself. Clearly, you will want to deduct the most you can, and the sure-fire way to do that is with OCL’s easy-to-use platform.
If you can claim OCL’s fees back on tax as a deduction too, why wouldn’t you use our platform to minimise your tax payable?
One Click Life offers online tax returns at your fingertips in an easy-to-use platform run by some of the best heads in the industry. Your tax return can be done in just 60 seconds and is overseen by one of our pros!
How easy and stress-free is that?
Taxes, health insurance, and wills can be time-consuming and tedious. Our app allows you to be able to do this fuss-free, giving you a simple way to organise, track and manage all of your life admin in one place. Let One Click Life take care of your tax return, and life’s essential tasks so you can spend more time doing the things you love.