The pandemic taught us a lot of things. How to make coffee, how to make sourdough bread. The one thing we all learned during the pandemic is how easy it is to be a sole trader.
In Australia, more than 31% of Businesses are sole traders, and the trend seems to be catching fire worldwide.
Being a sole business owner is very empowering and challenging. these challenges feel double during the tax times.
You have to make sure that your business expenses are managed, your inventory is set and your invoices are up to date.
This on top of your other business activities can prove to be a lot of work!
On one such movement, we all wish we had a Hulk, Like in Avengers, but unfortunately, we don’t. What we do have is determination, coffee, and these 5 tools.
Before we begin let’s gets our basic straight and understand a little about the taxation system for sole traders in Australia, and some basic tips to keep you ahead of your tax game.
Tax time for sole traders
Being a sole trader is a very empowering experience, the money you earn is solely yours. You are not burdened with paying other people salaries and you always love your boss. ( which is you).
The real struggle comes only during tax season. For larger businesses, they have a big team of accounting professionals, you do not have that privilege.
Let’s take a small look at different ways you can register your business for taxation purposes.
ABN and TFN
As a sole trader, you will need to apply for an ABN, which is a unique 11-digit number used to identify your business. You can register for an ABN and TFN simultaneously through the Australian Business Register (ABR) website or by completing the paper form. This registration will allow you to report your business income and expenses on your tax return.
Australian Taxation Office (ATO)
Once you have obtained your ABN and TFN, you can access ATO’s online services to manage your tax obligations. Through the ATO’s online portal, you can lodge your tax return, report business income, claim deductions, and track your tax obligations.
Business Activity Statement
If your business has a turnover of $75,000 and more. you are qualified for GST registration. you will need to lodge a Business Activity Statement (BAS) with the ATO. The BAS reports the GST collected and paid by your business. You can lodge your BAS online through ATO’s online services.
Now, that we know how the tax system works for small business owners. We understand the importance of different business processes like Project management, expense management, an up-to-date cash flow statement, financial reports and so much more.
Well, it’s no wonder that coffee cups multiply during tax season.
There is no need to worry, as there is a wide range of software and tools that will help you, during the tax season as well as after. This software will help you maintain your business’s financial health.
List of software for sole traders.
The following list of online accounting software is robust software on there own, but in this blog, we will be highlighting the specific features which make them a good fit for a solo business owner.
This is one of the most used software in Australia and the software lives up to its hype.
The Software gives you a very smooth third-party integration and advanced accounting features.
The software is best suited for medium and big-size businesses, but they have recently launched a feature that will benefit greatly to sole business owners.
This feature is short-term cash flow management. This feature will help your business manage your small or big projects and help you create good financial reports.
The software is big on the expensive side with only 30 days free trial period and the base plan costing around $10 per month.
2) Reckon One
When it comes to managing your accounts nothing beats the OG. Reckon One is one such OG is. The software offers a lot of advanced accounting services like Bookkeeping, payroll, etc. But as a solo business owner, the best feature they offer is Invoicing and auto reminders.
With the help of Reckon One you will be able to create dynamic invoices you can send directly from the software. Not only that you will also be able to send your clients auto reminders. As we all know that how difficult it is to constantly remind clients about the money they owe you.
If you feel like the pricing on Reckon One is steep, you can also check out Proftbooks. As profitbooks too provided a detailed invoicing feature.
As a sole trader, you know how difficult it is to manage your GST companies. GST is probably one of the reasons why you are having two cups of extra coffee. This is where QuickBooks Online comes to your rescue.
With the help of QuickBooks, you can simplify GST management by automatically tracking GST on sales and purchases. The software generates accurate GST reports, making it easier to complete your Business Activity Statement (BAS) and meet your tax obligations.
Taking off a big load from your day-to-day business operations, making it easy for you during the tax season.
As a business owner who is taking care of all their business transaction on their own, it’s very difficult to maintain up-to-date financial data of all your different economical activities.
Sage accounting software has a robust bank recollision network.
With Sage, you can easily import bank transactions and reconcile them against your recorded income and expenses. This helps identify any discrepancies or missing transactions, allowing you to maintain accurate and up-to-date financial records. Bank reconciliation is crucial for tracking cash flow, identifying errors, and ensuring your financial reports reflect the true state of your business.
What is the best way to bill your clients or customer, if you have an hourly rate? Yes, indeed you should have software that helps you keep track of the time you spend on a project.
FreshBooks provides an integrated time tracking and invoicing feature that simplifies billing for sole traders who charge for their time or services. You can easily track the time spent on different tasks or projects and then convert that time into invoices with just a few clicks.
The time tracking feature allows you to accurately record the hours worked, assign them to specific projects or clients, and apply hourly rates or flat fees. You can then generate professional invoices based on the tracked time, ensuring accurate billing for your services.
Being a sole proprietor or trader is a trend that is spreading like wildfire all around the world. This new type of business owner might be a jack of all trades, but every once in a while they might need help.
especially with accounting. All business owners can’t be experts in accounting. Hence they a software that understands their needs.
Proftbooks is one such software that is created with business owners in mind. With profitbooks, you can create robust invoices as well as manage your inventory and so much more.
Not only is Profitbooks filled with accounting features it also has “forever free plan” and ” lifetime deal”. This means that Proftibooks will be your Accounting software forever.
Check out our website to sign in to your accounting today.
How do I track and report my business income and expenses for tax purposes?
Sole traders often seek guidance on how to effectively track and report their business income and expenses. This includes understanding which records to maintain, what expenses are deductible, and how to keep accurate financial records for tax reporting.
What tax deductions am I eligible for as a sole trader?
Sole traders may have questions about the tax deductions they can claim for their business. This can include deductions related to home office expenses, vehicle usage, professional memberships, business insurance, and other expenses incurred in the course of running their business.
How do I handle superannuation (retirement savings) contributions as a sole trader?
Sole traders may inquire about their obligations and options for making superannuation contributions. They may seek information on how to calculate the required contributions, choose a superannuation fund, and ensure compliance with superannuation regulations.
Can I engage contractors or employees for my sole trader business?
Sole traders who plan to engage contractors or hire employees may have questions about their responsibilities and obligations. This can include understanding the distinction between contractors and employees, PAYG withholding requirements, and compliance with employment laws and regulations.
How do I manage my cash flow effectively as a sole trader?
Cash flow management is a crucial aspect of running any business, including sole trader ventures. Sole traders may seek advice on strategies for managing cash flow, such as invoicing and payment terms, setting aside funds for tax liabilities, and implementing effective budgeting and financial planning practices.
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