How To Claim Deductions And Minimise Liabilities As A Freelancer?

How to Claim Deductions and Minimise Liablities as a freelancer

Freelancing is an exciting profession to pursue. Be it making delicious cupcakes, capturing dream weddings on camera, or offering your design expertise, you’re the boss of your time and your skills.

But with this freedom comes the responsibility of managing your finances, including taxes.

Fear Not! KPG Taxation understands this and therefore we are here with a comprehensive blog that will provide the knowledge to maximise your deductions and minimise your tax liabilities come tax time.

Common Deductions Which Freelancers Can Claim

Let’s see which are the tax-deductible expenses you can claim as a freelancer:

Category Deductible Expenses
Home Office Occupancy expenses (if dedicated work area) or running expenses (shared workspace)
Equipment & Tools Laptops, cameras, software, office furniture
Safety Gear Gloves, steel-capped boots, high-vis vests, etc.
Car & Travel Fuel, tolls, repairs (business use portion only), public transport fares, flights, accommodation (overnight work trips)
Mobile Phone Business use portion of monthly phone bill
Superannuation Contributions Contributions you make to your super fund
Personal Services Income (PSI) (if applicable) Advertising & marketing, industry licences, relevant insurance

1) Home Office Deductions

Working from home? Good news! You can claim a portion of your home office expenses – occupancy expenses (rent, mortgage interest) if a dedicated area is used exclusively for work, or running expenses (electricity, internet) for a shared workspace. 

The ATO offers a handy fixed-rate method (52 cents per hour worked from home) for calculating running expenses.

2) Equipment And Tools

Are you investing in tools and equipment to promote your freelance game? You can claim these as deductions! This includes laptops, cameras, software, and even office furniture. 

There are two ways to claim these deductions:

  • Instant Asset Write-off: For assets costing $10,000 or less (and your business turnover is under $10 million), claim the entire cost immediately in the year of purchase.
  • Depreciation:  For assets costing more than $10,000, spread the deduction over several years according to their decline in value.

3) General Business Operating Expenses

Deductible expenses in this category include marketing costs, legal expenses, software subscription fees, accountant fees, bank fees, insurance premiums, interest on business loans, and uniform fees.

4) Safety Equipment

Protecting yourself is paramount. The cost of work-related safety gear like gloves, steel-capped boots, or high-vis vests is also claimable.

5) Repair And Maintenance Expenses

Costs associated with repairing or maintaining work-related equipment, machinery, or appliances are deductible.

6) Personal Services Income (PSI)

If your income is primarily based on your skills and expertise (think writing and graphic design), it might be classified as PSI by the ATO. This unlocks additional deductions like advertising and marketing expenses, industry licence fees, and relevant insurance costs.

7) Car & Travel

Are you moving around town for client meetings or deliveries? Keep track of car expenses (fuel, tolls, repairs) and claim the portion used for business purposes. 

Public transport fares, flights, and even accommodation for overnight work trips are also on the deductible list which you can claim. 

8) Superannuation

Don’t forget to contribute to your superannuation – these contributions are tax-deductible, ensuring a secure future for yourself.

What You Can't Claim And How To Keep Records?

While the list of deductible expenses is generous, there are some items you can’t claim:

  • Entertainment expenses: Those celebratory client lunches or dinners? Not tax-deductible.
  • Traffic fines or parking tickets: These are personal expenses which you cannot claim.
  • Childcare fees: While childcare allows you to work, it’s not a business expense.
  • Expenses unrelated to your business: If you’re a web designer but also sell crafts on the side, craft-related expenses can’t be claimed against your web design income.
  • GST component of an expense: If you can claim the GST as a credit on your business activity statement, you can’t claim it as a deduction as well.

Now, let’s address record-keeping, crucial for claiming deductions. While the ATO requires records for all business expenses, you don’t necessarily need a physical receipt for everything. 

Here are some ways:

  • Vehicle expenses: Use the cents-per-kilometre method (currently 78 cents per kilometre, up to 5,000 kilometres) instead of keeping receipts for every trip.
  • Home office expenses: Use the fixed-rate deduction (52 cents per hour worked from home) instead of receipts for electricity bills, etc.
  • Small expenses:  For expenses under $10, receipts might not be necessary, provided your total claim for small expenses is less than $200.
  • Missing receipts:  In some cases, you can explain the purchase with alternative records (bank statements, emails) if a receipt is unavailable.

How Partnering With A Reliable Tax Agent Can Minimise Tax Liabilities For Freelancers?

By understanding tax deductions and keeping good records, you can significantly reduce your tax bill and maximise your freelance income. 

But as a freelancer, how to cope with the busy schedule and track expenses to be at par with tax regulations? For this, you can rely on KPG Taxation expert tax accountants who can help you offer you personalised advice for your unique circumstances. 

Consulting with KPG Taxation

Focus On Growing Your Business, Leave The Accounting On Us!

  • Income Tax : File your taxes & get the best claims & returns.
  • Accountancy : Hire expert accountants to manage your transactions.
  • Bookkeeping : Let us handle your record books and expense reports.
  • Business Advisory : From company set-up to payroll, we handle it all.