
Freelance & Contracting Work
Freelance and contract work is forecast to be the way of the future. There’s a massive shift happening right now and the workers of tomorrow will increasingly be freelancers. The freelance lifestyle has its perks, but the biggest one is probably that you get to be your own boss. You set your own schedule, you decide when you want to work and, most importantly, you get to decide when you don’t want to work.
But if you ask any freelancer about the downsides, most of them will probably bring up the plethora of personal admin that they have to do. Instead of simply going to work and getting paid for it, freelancers have to log their own hours, organise their jobs and deadlines and then bill their customers for the work they’ve done. It can be a whole lot more administrative effort than your average job, but then again, that’s the trade off when you’re your own boss.
Invoicing
As a freelancer, you are essentially your own business. This means an invoice needs to include your business name (which may just be your full name), your ABN, your bank account details, a short description of the work you’ve done and a note on whether or not you’re registered to collect GST. Your invoice should also have a unique number so that it’s discernible from any other invoices that you’ve sent or received. There are loads of different invoice templates online that you can download for free.
Claiming
One great way to keep track of all your ingoing and outgoing money is to open up a separate account that is exclusively for your business stuff. This way you can get all your invoices paid into your business account and you can pay all your business expenses from that account. When tax time comes around, you’ve then got a really clear record of all your earning and spending and it means that doing your taxes is much simpler.
Tax
The major difference is that when you have a regular job, the ATO will collect a percentage of your income via your employer regularly throughout the year as a “prepayment” of tax – this is the “withholding”. When you’re a contractor though, the ATO requires you to estimate your own income each quarter, apply a rate set by the ATO and pay that amount. After you file your tax return at the end of the year, the difference is “trued up” – which may either be an additional payment or a refund.
It’s a good idea to have a direct debit coming from your account which will put aside all that money until tax time, because you wouldn’t want to accidentally spent it all and then owe the government a whole bunch of money…
Superannuation
Bear in mind that if you operate through your own company, then your company has to make super contributions for you.
Remember that the situation with superannuation depends on the agreement between the person and the employer. If you are effectively employed full time for your labour, the ATO considers you to be an employee for superannuation purposes, so the employer should be paying the superannuation guarantee.
This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt always seek professional guidance.
