Not everything in life comes at a cost… as a worker in Australia, the Federal government offers you a tax-free threshold – that is, an amount of income you can earn before you have to pay any tax. Currently, that amount is $18,200.
To put that into perspective on an annual basis, the minimum amount of money you can earn before you have to pay-as-you-go (PAYG) is
- $350 if you’re paid weekly,
- $700 if you’re paid fortnightly, and
- $1,517 if you’re paid monthly.
If you’re a contractor working with several companies and being paid irregularly or irregular amounts, calculating your PAYG can be complex. And, while it’s tempting to spend or invest everything you earn as you go, it is essential that you put money aside to meet your tax obligations (unless your hirer(s) is happy to put the PAYG aside on your behalf).
Important to note is that you can make voluntary PAYG instalments direct to the ATO. Once you earn business or investment income over a certain amount, you will be legally obliged to make instalments at a given frequency. You can work out how much money to put aside for instalments, based on your income, using the ATO’s calculator.
Regardless of whether you’re making voluntary payments or putting money aside in your own account, you will have to have an Australian Business Number and a Tax File Number (without a TFN you will not benefit from the tax-free threshold). You will also need to:
- complete and lodge activity statements you get from the ATO,
- report and pay GST on an activity statement if you are registered,
- keep records of your income (including invoices you issue) and business expenses,
- complete your tax return and the business and professional items schedule using your records.
Before you make any decisions about how much money to put aside to cover your tax obligations, your best bet is to talk to a tax accountant about your plans.
You can also talk to an expert at the Ayers Group. As a specialist contract manager, we’re able to manage your PAYG on your behalf and we can also connect you with experts on superannuation, novated leasing and more to help make your earnings go further.
Talk to an expert from the Ayers Group today.
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