TAX TIPS for self-employed

Stay one step ahead of the tax man with this check list of self-employed tax tips.

1. ABN

You need an ABN. Without it, you will pay 48.5% tax on anything you earn. If you earn more than $75,000 you need to register for GST.

2. GST

You can claim a deduction on essential goods and services whether you are registered for GST or not. You need a tax invoice for all taxable purposes (items that are less $55 GST inclusive are exempt). Make sure you keep and record the amounts of your tax invoices. If you are GST registered then you can also claim a GST input tax credit when you do your tax. You need to separate out the GST component of each tax invoice in order to do this.

3. Tools for self-employed

Self-employed tradies who are in STS (the Simplified Tax System) can “write off” tools up to the value of $1,000 in the year you purchase them. Remember to keep your tax records year to year so your accountant knows what tools and equipment are on your continuing list of depreciable items.

4. Tools for employees

Tools that cost less than $300 can be claimed as an outright deduction. Tools that cost more than $300 have to be depreciated. This means you claim them over a number of years as they reduce in value. Once they wear out completely you can claim the balance that has not yet been depreciated.

5. Protective clothing

The ATO considers boots, hard hats and other protective clothing to be essential for your work, so they can be claimed as tax deductions.

6. Sun protection

Sunglasses and sunscreen can both be claimed as deductions, provided you are using them for work purposes.

7. Mobile phones


Whether you own your own business, or work for someone else, mobile phones are a tax deduction for the business. So as a business owner, your business mobile phone is tax deductible. So are any phones you provide to your employees. You can claim them all as deductions and they won’t put your employees out of pocket.

8. Transport

If you have to transport heavy or bulky tools to and from work, you can claim transport costs.

9. Travel

Any travel you do that relates to your business, self-education or learning can be claimed. Make sure you keep journal notes of travel that relates to work (e.g. visiting work sites interstate or in another country to share information or work practices). If you travel less than 5,000 km per year you can claim a rebate based on a cents-per-kilometre amount. If you travel more than 5,000km you need to keep a log.

10. Health insurance

If your income is above $50,000 and you do not have private health insurance you could be faced with a Medicare Surcharge of 1% when it comes to tax time.

11. Recording income and expenditure


Always keep the originals of tax invoices and receipts, as well as recording amounts in your cash book. If you are audited you will be required to show these. You are obliged to keep tax records for 7 years. It is a good idea to get specific book keeping software such as MYOB or QuickBooks. But if you are organised and diligent, a carefully laid out Excel spreadsheet will do just as well.

Remember to file outgoing invoices in date, invoice or cheque number order so you can always locate them easily.

The good news! If there are some receipts you simply cannot locate, The ATO now accepts your credit card statement as proof of payment.

12. Tax advice


It is worth getting an accountant to do your annual tax return. They will save you a lot of time and (hopefully) money. Make sure you shop around for an accountant with expertise in freelancers and/or tradespeople. The accountant’s fee is tax deductible.

QUICK Links

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