Taxes just the word is enough to make many of us shudder. But what if I told you that understanding Australia’s Self-Employed Vs Freelance tax could be the key to putting more money back in your pocket? Originally published on https://taxly.ai/tax-deductions/self-employed-vs-freelance-tax/

1. Self Employed Vs Freelance
Tax – Key Things to Know
Whether you’re a seasoned local or a
newcomer to the Land Down Under, this blog
is your guide to understanding your tax
responsibilities. In the next few minutes,
we’ll break down the self-employed vs
freelance tax similarities and differences.
Safe & Secure
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2. Self Employed and Freelance Key Tax Deductions
First, let’s see the key deductions for self employed and freelancers
in Australia.
1. Home Office and Workspace Expenses
2. Business-Related Supplies Expenses
3. Business-Related Vehicle Use Expenses
4. Business Travel Costs
5. Professional Membership and License Fees
6. Marketing and Advertising Expenses
7. Home Internet and Phone Costs
8. Professional Development and Training Expenses
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3. ● Bank Fees for Business Accounts
● Business Insurance Premiums
● Depreciation of Business Assets
● Rent or Lease Payments
● Superannuation Contributions
● Interest on Business Loans
● Meals and Entertainment Expenses
● Employee Wages and Super Contributions
● Taxation and Accounting Fees
● Payments to Subcontractors
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4. Self Employed Vs Freelance Tax Implications Australia
In Australia, self-employed and freelancers work for themselves
independent. But each of these individuals have distinct tax implications
according to the guidelines set by the Australian Taxation Office (ATO).
Let’s explore the key features and differences between the two:
Income Tax
What it means: You have to pay tax on the money you earn.
Record-Keeping
What it means: You need to keep accurate records of your income and
expenses.
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5. Quarterly Installments
What it means: If you expect to owe a substantial amount in taxes, you might
need to pay in smaller amounts throughout the year instead of in one lump
sum.
Medicare Levy
What it means: A portion of your income goes toward funding Australia’s
healthcare system.
Superannuation
What it means: You’re responsible for saving for your retirement because you
don’t have an employer to contribute to your superannuation fund.
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6. Business Structure
What it means: The way you legally set up your business affects your taxes and
liability.
Tax Reporting
What it means: You must accurately report your income and expenses on your
annual tax return.
Capital Gains Tax (CGT)
What it means: If you sell assets related to your business, you may be taxed on
the profit.
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7. Record Keeping
What it means: Keep financial records for a specific period as required by
the ATO.
Self-Employed Vs Freelance Tax
Australia – Key Differences
Business Structure
Self-Employed: Often operate as sole traders, companies, or
partnerships, with distinct legal entities.
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8. GST (Goods and Services Tax)
Self-Employed: Must register for and charge GST on taxable sales if their
annual business income exceeds the GST threshold (currently $75,000). They
need to submit regular Business Activity Statements (BAS) to the ATO.
Long-Term Commitment
Self-Employed: Often involves a long-term commitment to running a business,
managing employees, and business operations.
Business Expenses
Self-Employed: Can claim deductions for a wide range of business-related
expenses, including rent, utilities, and employee wages.
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9. ABN (Australian Business Number)
Self-Employed: May or may not have an ABN, as it depends on their business
structure and whether they require one for their operations.
Tax Reporting Section
Self-Employed: Report business income and expenses on their individual tax
return using a Business and Professional Items Schedule (Form T2125).
Capital Gains Tax (CGT)
Self-Employed: May face CGT implications when selling business-related
assets, with potential concessions for small business owners.
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10. You Qualify as a Freelancer if You
Offer Specialized Services
Freelancers offer specialized skills or services, often in creative, technical, or
professional fields like writing, design, IT, or consulting.
Work Independently
Freelancers work independently without long-term employment contracts,
often juggling multiple clients or projects.
Make Contractual Agreements
Freelancers use contracts or project agreements that outline work details,
payment terms, and deadlines.
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11. Key Traits of Qualifying as Self-Employed Individual:
Independant Business Operations
Self-employed individuals run their own businesses, which can take various
forms, like sole traders, companies, partnerships, or trusts.
Own and Control Business
They have full control over business operations, including decision-making,
finances, and hiring.
Legal Business Structure
They choose a legal structure for their business, such as registering as a sole
trader, setting up a company, or forming a partnership.
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12. Personal Liability
Self-employed individuals are personally liable for their business’s debts and
obligations, except in the case of limited liability companies.
Profit and Loss
They bear the financial risks and rewards of their business, potentially earning
profits or incurring losses.
Regulatory Compliance
They must meet legal requirements, such as obtaining an Australian Business
Number (ABN), managing GST obligations if applicable, and maintaining
accurate business records.
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13. In a Nutshell
Knowing self employed vs freelance deductions can put more
money in your pocket. You must adhere to your freelancer or self-
employed tax responsibilities in Australia according to ATO
Guidelines. Keep expense records, seek professional advice, and
make the most of these deductions to lower your taxes.
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