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Re: Paying tax

Newbie

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Hi.

I have a few questions.

I'm wanting to start cleaning houses! Up to 12hrs per week. 

1) Do I need an ABN to do this. 
2) If a client prefers to pay in cash how do I pay tax on this.

3) Do I need to deposit this money into my account.
4) Do I need to supply an invoice and receipt for my services.

5) If I earn under a certain amount per year will I receive all the tax paid back?

6) Whats the differences if I don't get an ABN. 

Thanks it's much appreciated. 

 

 

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Most helpful response

ATO Community Support

Replies 0

Hi @Reah,

 

Great place to ask your questions Smiley Happy

 

1. If you're going to be operating as a sole trader (running your own business) then you would need to apply for an ABN. However you need to go through the Australian Business Register to check your entitlement to an ABN.

 

2.  It's understandable that for some people, paying by cash is a preferred option to EFTPOS. As a sole trader, the income you receive from customers isn't taxed at the same time that you receive it (unlike when you're an employee and your employer withholds tax from your pay for you). So it's important that you put aside money to meet your tax obligations at the end of the financial year. Normally this is done by paying quarterly Pay As You Go (PAYG) instalments.

 

3. It's your choice whether the cash payments are deposited into your bank account, so long as you declare all of the income on your tax return and maintain good records. Generally speaking, you need to keep records of invoices and expenses for a period of five years from the date you lodge your tax return.

 

4. Invoicing is an important document as it records your customer payment obligations and tracks the purchase of your services. It also helps with your requirement of appropriate records management. I'll include links to two resources below for you; a forum post asking a similar question and a Business Government page on how to invoice.

 

5. The current tax-free threshold for sole traders is $18,200 (the same as individuals). So if your total income across all sources (for example if you have another employer, receive certain payments or benefits that count as taxable income) is less than this then you should not have a tax debt obligation.

 

6. If you're operating as a sole trader, then you require an ABN. If you don't have an ABN, then you wouldn't be viewed as operating a business. Additionally, you need to include your ABN on the invoices you issue.
    
For some extra information for you, the income you earn from running the business (and any relevant expenses) is declared in the business section of your individual tax return using your own tax file number. As this income isn't taxed when you receive it, your tax liability will be calculated when you lodge the return (meaning you may end up with a tax bill). A response from @JoshH on a similar forum post explains some of this, and I'll include the link below.
    
ABR
Sole trader
PAYG
Record Keeping
Forum post -Sole Trader How to Invoice
Business Government How to Invoice
Tax-Free threshold Sole trader
JoshH Additional Info
   

Hopefully this information helps Smiley Happy
    
RachATO

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @Reah,

 

Great place to ask your questions Smiley Happy

 

1. If you're going to be operating as a sole trader (running your own business) then you would need to apply for an ABN. However you need to go through the Australian Business Register to check your entitlement to an ABN.

 

2.  It's understandable that for some people, paying by cash is a preferred option to EFTPOS. As a sole trader, the income you receive from customers isn't taxed at the same time that you receive it (unlike when you're an employee and your employer withholds tax from your pay for you). So it's important that you put aside money to meet your tax obligations at the end of the financial year. Normally this is done by paying quarterly Pay As You Go (PAYG) instalments.

 

3. It's your choice whether the cash payments are deposited into your bank account, so long as you declare all of the income on your tax return and maintain good records. Generally speaking, you need to keep records of invoices and expenses for a period of five years from the date you lodge your tax return.

 

4. Invoicing is an important document as it records your customer payment obligations and tracks the purchase of your services. It also helps with your requirement of appropriate records management. I'll include links to two resources below for you; a forum post asking a similar question and a Business Government page on how to invoice.

 

5. The current tax-free threshold for sole traders is $18,200 (the same as individuals). So if your total income across all sources (for example if you have another employer, receive certain payments or benefits that count as taxable income) is less than this then you should not have a tax debt obligation.

 

6. If you're operating as a sole trader, then you require an ABN. If you don't have an ABN, then you wouldn't be viewed as operating a business. Additionally, you need to include your ABN on the invoices you issue.
    
For some extra information for you, the income you earn from running the business (and any relevant expenses) is declared in the business section of your individual tax return using your own tax file number. As this income isn't taxed when you receive it, your tax liability will be calculated when you lodge the return (meaning you may end up with a tax bill). A response from @JoshH on a similar forum post explains some of this, and I'll include the link below.
    
ABR
Sole trader
PAYG
Record Keeping
Forum post -Sole Trader How to Invoice
Business Government How to Invoice
Tax-Free threshold Sole trader
JoshH Additional Info
   

Hopefully this information helps Smiley Happy
    
RachATO