If you are now a part of our Better Caring community of care workers – and if you are offering your services as a self-employed worker – you will need to remember to take control of your own tax and super. We’ve developed this quick guide to assist:
Setting aside money for tax
Being a self-employed care worker means that your income is probably not consistent from month to month. You will need to manage your money well – check out 9 steps to managing an unpredictable income.
Planning ahead is the key. It may be difficult to pay tax bills in bulk once they are due, so to make life easier we recommend that you put money aside for this.
Please note that, if you do not meet your tax obligations, you could be at risk of a heavy fine.
How much tax do I need to pay?
If you are unsure how much tax you need to pay, there are numerous income tax calculators available on the Internet. Check out Money Smart’s online income tax calculator or the simple tax calculator accessible via the ATO’s website to work out how much money you will need to put aside.
If you are working under an Australian Business Number (ABN) and your business is registered for Goods and Services Tax (GST), remember to set money aside for this also. Although keep in mind that many home care services are GST exempt.
What are tax deductions?
Tax deductions are certain expenses you have incurred in order to earn your income. Deductions will reduce your taxable income before your tax is calculated.
Tax deductions include:
– Work related expenses
– Self education expenses
– Charitable donations
– The cost of managing your tax affairs (e.g. paying your accountant)
Keep track of your business expenses throughout the year. If you aren’t sure whether something is a valid expense call the ATO or ask your accountant.
Don’t forget your superannuation!
If you are a self-employed care worker, you will need to also think about your superannuation. If you don’t put money towards your superannuation, you could risk not having enough money when you retire.
Currently, super is calculated by taking 9.5% of your ordinary time earnings.
To work out what super you must pay, you will need to work out what your income is per quarter.
For example, during the first quarter of the financial year (1 July – 30 September 2014) Sally’s ordinary time earnings were $8,000, so the super contribution Sally had to pay per quarter was:
$8,000 x 9.50% = $760
There are also superannuation calculators available on the Internet, check out the superannuation guarantee contributions calculator to work out how much super you must contribute. You will need to pay the outstanding amount to your complying super fund or retirement savings account.
If you wish to continue reading about your obligations you can access this information via the ATO website
Note: The above information should not be considered legal, accounting or tax advice. We recommend you speak with an accountant or tax advisor or your financial advisor and we expressly disclaim any responsibility for any action taken or not taken based on this information.