Tax Rules for Contractors
There are special tax rules for independent contractors to ensure that you do not use business structures to avoid your income tax obligations. You may also have to arrange to pay your own tax. It’s important to speak with your accountant to ensure you understand your tax obligations. Contact Maitland Accountants today to discuss your tax rules. Here are a few rules you need to know as a contractor:
Tax File Number (TFN) – If you are operating as a sole trader you must use your individual TFN. If you are part of a partnership or a registered company you will need to apply for a separate TFN.
Australian Business Number (ABN) – Independent contractors need to have an ABN to use when dealing with other businesses.
Goods and Services Tax (GST) – As an independent contractor you will probably need to register for GST.
Personal Services Income (PSI) –
- If you operate as a sole trader, you are entitled to claim certain expenses as tax deductions necessary to earn your income.
- If you operate as a partnership, the partnership is entitled to claim certain expenses as tax deductions that are necessary to earn the partnership income.
- If you operate as a company or trust, the PSI rules may particularly affect you.
Voluntary withholding tax arrangements with your hirer – You may be eligible to enter into a voluntary agreement with the hirer that will enable the hirer to withhold tax for you.
Payroll tax – Payroll tax is a state tax on the wages paid by employers.
To find our more information on these rules and how they affect you and your business call Maitland Accountants today.
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