Last week we talked about the difference between companies and sole traders and registering for GST. This week we will be looking at claiming expenses, tax rates and setting aside money for tax and ACC.
How do I claim expenses if I don’t register for GST?
If you are registered for GST, you claim the GST portion in your GST returns. If you aren’t GST registered, you can claim the whole amount (including GST) as an expense in your end of year accounts when your tax return is prepared. Remember to keep your business related receipts or use secure online (cloud) software to keep them for you.
How much do I need to put aside for tax?
If you put aside 20% of your sales (if you are not GST registered), that should be enough to cover your tax and ACC. For example – In most cases, if your sales are at $50,000, by the time you claim your running expenses, your tax rate should be below 20% meaning you have covered yourself with the money you have put aside.
If you are GST registered, you will need to put aside more to cover your GST payments too.
What if my business is part-time? What should my tax rate be on my wages if I have another job with PAYE deducted?
Depending on your income, we would suggest you make your tax rate at the job with wages as secondary tax if it is not your main source of income. Your employer will provide you with a form to guide you to the correct tax code. Remember – if you earn over $70,000 per year, your tax rate will be 33%.
Next week, we will look at what you can actually claim on from vehicles to home expenses if operating from home plus business assets.
Once again, keep in mind that we are only a quick email or phone call away so you can book your FREE consultation with us – 07 308 5576