When you’re an employee being paid on PAYG and have been for some time, you may get a little lost after making the jump to self-employment. There are a number of aspects that you need to consider to ensure that you are managing your finances effectively.
Super
It’s easy to forget that while you work your employer makes super contributions in the background, but when you’re self-employed you will need to make these contributions yourself or face the consequences of not having enough income for your retirement.
Another point to keep in mind is that if you are making super contributions, up to $25,000 of these can be claimed as a tax deduction.
Paying Yourself
If you’ve got a business bank account it can be tempting to just start making personal purchases out of this account, especially if you’re the only one who’s a part of the business. Other than driving your bookkeeper and accountant crazy, doing this means that you never have a good idea of how much your business, and you personally, are making. To get past this you should pay yourself a regular wage, just as you would get if you were paid by an employer.
Leave & Other Entitlements
Being your own boss means if your business is going through a quiet period, you probably won’t be able to pay yourself. This also applies to going on holiday or being unwell, as you don’t have the typical entitlements that you would as an employee on PAYG. To manage this, you should keep funds aside for unexpected situations or holidays.
Another way in which you’ll be able to safeguard against illness or injury is to arrange income protection insurance. Also handy is the fact that insurance expenses are tax deductible.
Don’t Forget ATO Obligations
If you’ve been running your business for a while now, you may have registered for GST by earning over $75,000 a year, or for PAYG if you’ve hired employees. It’s important to note down exactly when you are obligated to report to the ATO for these registrations as well as to keep money aside to make these payments. To do so, it may be worth opening a separate bank account you regularly transfer to so you aren’t under the impression that you have money to spend when it needs to go to the ATO later on.
If you need help managing your money as someone who’s self-employed, contact the professionals at iBusiness Group. Our knowledge and experience in the industry allows us to assist new and existing business owners get themselves off of the ground and work towards financial independence.