Working in the gig economy can provide an easy and flexible source of income for many Australians, however, being a gig worker means all the responsibilities of running a business apply: reporting their income, expenses, keeping clear records, and paying their own taxes.
Getting all your information in order for tax time is all the more difficult for gig workers who may have sporadic work patterns across multiple different platforms, each with different reporting capabilities. Add in the fact that the majority of gig workers use it as a side hustle in addition to their regular job with its own tax requirements. So, here are five tips to help gig workers conquer tax time with ease and make the most out of being self-employed:
The core numbers you need to be keeping track of and reporting to the tax office are your income and expenses. As a gig worker, this can be harder than it sounds as it tends to be groups of small payments and expenses scattered throughout the year.
The easiest way to keep track of these payments and expenses is to use a separate bank account for any work you do under your ABN. This allows you to keep your gig income separate from any other sources of income and will make reporting it all the easier. For your expenses it is recommended that you keep a photo/copy of all your receipts which are easy to manage using a mobile app.
A good rule of thumb to work off is that you have to declare almost any income you earn and pay tax on it. With that in mind we can plan for tax time by making savings for our tax bill throughout the year.
The single biggest weapon a self-employed individual can possess, is the power to control their cash-flow effectively. Part of cash-flow is making sure there is enough money coming in the door and the other part is managing the cash properly once it’s in.
Are you registered for GST? It is a simple question with big ramifications if you are a self-employed gig worker. Some platforms make it a requirement that gig workers are GST registered so it’s worthwhile checking to make sure.
Being a self-employed gig worker, it is important to recognise that in most circumstances the platform you work through will not be paying superannuation for you. As small-business owners, we have a responsibility to make the appropriate contributions to our retirement.
If you plan to contribute to super, and there may be great tax breaks if you do, I would suggest putting aside a percentage of your income (as an employer does) and making regular voluntary contributions to your fund throughout the year.
The final tip is to spend the time throughout the year to extract and collate all of your important documents from different platforms and store them in your own secure place. The reality is that several years from now the tax office and other regulators can look back and ask you to produce documents such as invoices or work history that are stored on these platforms.
Patrick Harrison, Director, Solo & Smart