Contracting work tax requirements?

Please note this sub-forum does not provide professional finance advice. You should seek advice from a licensed financial advisor.

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification.

If investing please consider our affiliate link for new accounts: Sharesies.

Forums › Finance and wealth management › Contracting work tax requirements?

Disrespective

1934 posts

Uber Geek
+1 received by user: 146

#114026 5-Feb-2013 15:46

So the architecture market is slow and all the work I can find is contracting but i've never done it before and would like some informed thoughts if possible.

Specifically, as i've just started work do I still need to fill a tax return for such a small period of time before the end of this financial year or can I wait until my next tax return to file for that?

Also, I'm more than happy to file my return/s e.t.c. rather than get an accountant, but are there any tricks that they might be able to tell me about to make my life more bearable, and in turn mitigate their cost to me?

I'm sure I have other questions but for now that's all that I can think of.

itxtme

2102 posts

Uber Geek
+1 received by user: 557

#756142 5-Feb-2013 16:19

1) Work out if you will earn more than 65K (from memory) as a contractor in a year, if so you NEED to be GST registered, and you need to collect the GST

2) Get an excel work book and use it to do your taxes. Money in, Money out incl. expenses. The IRD have exemplars you can download.

3) Keep all reciepts if you intend to claim expenses, being a contractor there are quite a few you can claim on, ranging from obvious, to a little more understanding required.

4) Have SEPARATE bank accounts - cannot stress this enough, makes your excel sheet a lot cleaner, and reconcilliation takes me 10-20 mins every month.

I am probably in the same boat as you, I earn 95% of my wages from from an employer and pay PAYE, and then run a contracting buisness on the side. Not GST registered, but do claim expenses. I do all my own tax, and find it pretty straight forward.

As far as having to file before the end of this tax year, if you have invoiced/paid then yes you will need to do a tax return for this financial year, you cannot push it into the next year. If you havent been paid and you wanted to re-invoice the company that hired you, you could send the invoice after the new tax year starts. TBH its really not that hard to do one!

Jas777

840 posts

Ultimate Geek
+1 received by user: 111

#756793 7-Feb-2013 08:42

It all depends on how much money you have earned in the current tax year as to when you should try and get your income. If you haven't earnt that much then try to get as much of the income as you can in the current tax year as the total tax you pay on it as a percenatage will be lower than if you push it into another tax year where you earn a reasonable amount of money.

There is many things you can claim too. If you have to travel a lot then you could write off the cost of your car against your income.

jamesrt

1663 posts

Uber Geek
+1 received by user: 941

ID Verified

Trusted

Lifetime subscriber

#756798 7-Feb-2013 08:55

Get a decent accountant. Seriously. The whole Income Tax / IRD area is more complicated than you think, and chances are if you DIY, you'll screw it up and disadvantage yourself (probably not with serious consequences, but enough to be really annoying). And yes, this is the voice of experience!

I also agree with the previous comments about GST registration, need for separate bank accounts, etc; you could also sign up to a service like Xero and do all your bookkeeping online there - any decent accountant you've engaged will then be able to access your accounts via Xero and make everyone's life easier (which means cheaper!). The Xero subscription and the actual accountants fees should count as legitimate business expenses and hence be tax deductible.

timmmay

20858 posts

Uber Geek
+1 received by user: 5350

Trusted

Lifetime subscriber

#756810 7-Feb-2013 09:13

I suggest you get Xero ($35-$50/month), then have an accountant review your accounts before you submit your first returns. It's probably easier if you have them set you up and get you going as well. It can generate all tax returns for you, but an accountant can do things like offset home office expenses, mortgage interest, etc.

itxtme

2102 posts

Uber Geek
+1 received by user: 557

#756915 7-Feb-2013 13:20

jamesrt: Get a decent accountant. Seriously. The whole Income Tax / IRD area is more complicated than you think, and chances are if you DIY, you'll screw it up and disadvantage yourself (probably not with serious consequences, but enough to be really annoying). And yes, this is the voice of experience!

I have to disagree on the necessity of this. It is good advice, but if he is doing only 5 transactions a month, Xero & an accountant is overkill IMO. If he is looking for every available avenue of tax deduction then I agree, but if just a contractor doing 1-3 jobs a month not really necessary.