I’ve just begun working as an independent contractor using my own ABN. Having trouble finding out how much tax I should be putting aside each week from my pay. Is there a rough percentage I can go by as a guide. Don’t want to get a shock at tax return time!
Hi @cmmercury,
As a sole trader, the tax rate applicable is the same as if you were working as an employee. This means you're taxed on your total assessable income at the end of the year at the applicable rate. You have the option to put aside tax at the applicable rate yourself, or you can pay it to us regularly through the pay as you go (PAYG) instalment system. This works similarly to if you were an employee, where your tax is paid to us over the year to have it set aside for when you lodge your return - the main difference is you pay it to us instead of an employer. Have a read through our page on PAYG instalments for a bit more information.
If you choose to handle the tax yourself, you'll need to withhold at a rate applicable based on your earnings. A good place to start is our page on individual tax rates. You'll need to determine which rates apply to you (Resident, Foreign Resident, etc.). You can then estimate how much you'll earn over the financial year to determine how much tax you'll need to put aside - what rates would apply. For example, lets say you determine you'll earn about $50,000 and are considered a tax resident. You would need to make sure by the end of the financial year you've put aside $5,092 for the first $45,000 you've earnt, and then 32.5 cents for every $1 over. You may also wish to discuss this with a tax agent, or a financial advisor. They would be able to provide more specific advice based on your situation and earnings.
Hi @cmmercury,
As a sole trader, the tax rate applicable is the same as if you were working as an employee. This means you're taxed on your total assessable income at the end of the year at the applicable rate. You have the option to put aside tax at the applicable rate yourself, or you can pay it to us regularly through the pay as you go (PAYG) instalment system. This works similarly to if you were an employee, where your tax is paid to us over the year to have it set aside for when you lodge your return - the main difference is you pay it to us instead of an employer. Have a read through our page on PAYG instalments for a bit more information.
If you choose to handle the tax yourself, you'll need to withhold at a rate applicable based on your earnings. A good place to start is our page on individual tax rates. You'll need to determine which rates apply to you (Resident, Foreign Resident, etc.). You can then estimate how much you'll earn over the financial year to determine how much tax you'll need to put aside - what rates would apply. For example, lets say you determine you'll earn about $50,000 and are considered a tax resident. You would need to make sure by the end of the financial year you've put aside $5,092 for the first $45,000 you've earnt, and then 32.5 cents for every $1 over. You may also wish to discuss this with a tax agent, or a financial advisor. They would be able to provide more specific advice based on your situation and earnings.
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