How Contractors Can Make The Most of Their Tax Returns

It’s not uncommon for contractors to leave their tax returns until the end of the tax year. As a result, they scramble to complete their tax returns before 31st October.

 

The Australian Taxation Office notes that contractors have different obligations than employees because they’re responsible for their tax and superannuation. However, being mindful of their tax returns can make their life easier, allowing them to maximise their income and minimise the hassle.

How Can Contractors Make the Most of their Tax Returns?

Superannuation

Contractors can add to their superannuation fund directly from their pre-tax income. It’s an effective way to top up their super. You’ll also want to check your contributions for the current financial year before considering adding extra. You have until 30th June to add more contributions to your superannuation fund. However, it’s important to note that these contributions are subject to ATO’s concessional contributions cap of $25,000. You can visit ATO’s website for more clarification.

Gathering Their Financial Statements

Contractors must also prepare their financial statements in advance because it’ll help them assess if personal services income (PSI) rules apply. In addition, preparing these statements beforehand will allow you to determine if you’ve sold any investments and if you can claim tax deductions on these investment expenses.

Itemising Their Receipts to Maximise Tax Deductions

Contractors will also want to itemise their receipts to maximise tax deductions. The Australian Taxation Office allows contractors to claim business-related expenses as deductibles, enabling them to lower their taxable income. As a result, claiming tax deductions helps them increase their take-home pay.

 

You can learn more about claimable deductions by visiting the Australian Taxation Office’s website. They have a helpful section devoted to claimable deductions for contractors.

Private Health Insurance

Some contractors also purchase private health insurance since they don’t receive medical insurance from an employer. You’ll want to review your situation if you don’t have PHI. Contractors exceeding a specific income threshold are liable to the Medicare levy Surcharge (MLS) for any financial year where they didn’t have sufficient private health cover. It’s also important to note that the MLS is an addition to the pre-existing 2 per cent Medicare levy. Taking out cover will allow you to save money, particularly on your yearly premiums. 

 

Get Started with Achieve Corp

Tax time can be challenging for most contractors, especially since they must fulfil their tax obligations themselves. As a result, many contractors often partner with a contractor payroll management company to assist them.

 

If you’re looking for assistance with your payroll management and legal tax minimisation, Achieve Corp can help you. The company is one of the top-rated Australian payroll service providers and specialises in payroll services for contractors.

 

Achieve Corp has a qualified team with the experience and capabilities to meet each contractor’s unique needs. It doesn’t matter whether you’re an IT or an independent contractor. They’ve got you covered. Achieve Corp has over 18 years of experience and has cemented itself as a leading payroll services provider for contractors. Contact them today to find out how they can help you.