As a new sole trader, understanding taxes probably doesn't seem like the most exciting aspect of your business. You've just started your own business, came up with an idea and customers are starting to come in. It seems overwhelming, but there are a couple of things you need to know about taxes right now.

When you're starting your own business, here are 5 things you'll need to know.

1. All your business income less business expenses needs to show in your tax return. If you have more income than expenses, then this is profit. Profit is taxed on your tax rate depending on how much other income you have. If your business is more of a side hustle when you have a full-time or part-time job, then you will likely need to hold more money aside for tax than someone who only runs their business.

2. A good rule of thumb when starting to put tax aside is 25% if you are not registered for GST and 30% if you are. This does depend on how much profit you make, so be sure to chat with your accountant and get the right % for your circumstances. If you save more money for tax then this is like a tax refund for you.

3. Record keeping is super important. If your cost is in relation to earning your income, then it will be claimable on your tax. What does this mean? - each cost reduces your profit so you pay less tax. Also - the software is great but starting out with a spreadsheet is just as good if you only have a small number of transactions.

4. It's good to put a bit of money aside in case you get sick or want to go on leave - so have a separate bank account for this so that you don't need to stress if you can't or don't want to work. A great way to squirrel it away is to have a different bank hold an account for you that you rarely look at, and put 5% of your income aside each week.

5. Your ABN and your TFN are yours forever. If you choose to close down your business, then you will keep the same ABN even if you start up again 10 years later. BONUS - don't forget that you are working for yourself, so make sure you are charging the right prices so that you can cover your living expenses while still paying all of your business bills and saving money for tax too.

Tax tips can protect you from having poor cash flow in your business. Make sure you learn as much as you can so that you know how and when to claim your tax deductions.

Do you have tax questions about your business? Book an appointment with us now!

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