draw ‘til you’re soreWelcome to the bog of Jessica Amber. Herein you’ll find my life, whatever Irandom stuff ’m getting up to. It’s usually creative.
Unmaintained since 2019. Please go to www.jessicaamber.com.au This site contains affiliate links.
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Introduction, AKA I'm just a kid!!!...I'm 25 years old this year. So most people would not hesitate to call me a legal adult. But getting that feeling of being a competent adult is much harder. When I consider one of the most 'adulty' things an adult can do, tax is pretty high up on the list. Keeping rigorous track of money and informing the government of it each year? Doesn't sound like a barrel of laughs. But today I have the motivation to learn a bit more, and to fill in my tax return, so we are going to learn together! Important DatesThe period of a tax return is from the 1st of July last year to the 30th of June this year. So any money in or out within those dates is what we are concerned with. Tax returns are due by the 31st of October this year. If you don't pay by then, you might incur fines and stuff. You can contact the ATO and make alternative arrangements if you know for sure you're not going to file your return in time. Even if you're past the date and haven't submitted, still do it as soon as possible. Submit It OnlineHooray for internet devices, because they mean you don't have to submit a tax return on paper. You can do it through an online service called MyTax. The one prerequisite for using this service is that you have to have a MyGov account, and then link it to the Australian Tax Office. I've already done that a few years ago, so I won't be covering how to do that. But the ATO website does have a video showing you how to do it: https://www.ato.gov.au/Individuals/Lodging-your-tax-return/ That website also has the link to the MyTax service. So let's click it and see what happens.
(Tax) Return To Sender (that's just a little joke)Now We're In The Thick of It
Sole Trader-ing
What is a labour hire firm? A labour hire firm is an entity that arranges for workers to provide services directly to customers. Under such an arrangement: - the customer pays the labour hire firm for this service; - the labour hire firm pays the worker for services provided to the customer; - the worker is not an employee of the customer; and - the labour hire firm may or may not employ the worker. Click the link below for more information on: Now, I did do some work through the labour hire agency Airtasker. However, it was not ALL my business income, as the question specifies, so I'll be answering No.
Rosemary is a successful artist and operates as a sole trader. During the income year, she earned income from the following transactions:
Rosemary’s income from each of the 20 painting sales was from the sale of goods. Even though Rosemary used considerable personal efforts and skills in producing each of the paintings, any later contract for the sale of those finished paintings was for the sale of goods. On the other hand, for each commissioned portrait, the income was not for the sale of goods. Rather, the payment was mainly for the provision of Rosemary’s efforts and skills to create a portrait, not the sale of a previously completed painting. Rosemary would therefore answer ‘no’ to this question. The explanation provided here is wonderfully relevant to my artistic career, and makes it clear that my commission work does not count as sale of goods, so I too can answer No to this question.
Select the type of payment which made up 75% or more of your personal services income (excluding any amounts you received as an employee) *
So at this point I need to recall all the commission jobs I've done, and how I was paid for them. It's really good if, throughtout the year, you keep a spreadsheet of your incomes and expenses, to make this step easier. I partially did, tracking my Redbubble sales, but I dind't track my commission work, so I'm doing that now. Luckily there was only like a handful of jobs in that category for this period. This moment also brings an area of taxation to light that confuses me. I sent a Facebook message to the Australian Taxation Office, in the hopes that they could explain it for me: A Brief Detour - When Is Money Earned?I was hoping you could clarify how to figure out when an income is earned. I am a sole trader as an artist. I do commission work for a fixed fee. When is the income for a job considered earned - when I agree to do the work, when I send an invoice, when the invoice is paid, or something else? The same question for earnings through an online retailer like Redbubble, who I upload designs to and they print them on garments. Is the income dated at the date of the sale, or when the money is deposited in my account? While waiting for a response, I continued to attempt to research the issue. This article from the ATO gives one interesting piece of information on the idea of determining income earned via two methods: Receipts and Earnings. Receipts method8. The 'receipts' method is sometimes called the 'cash received' basis or the 'cash' basis. Under the receipts method, income is derived when it is received, either actually or constructively, under subsection 6-5(4) of the ITAA 1997. The effect of that subsection is that income is taken to have been derived by a person although it is not actually paid over, but is dealt with on his/her behalf or as he/she directs. Earnings method9. The 'earnings' method is often referred to as the 'accruals' method or the 'cash and credit' method. Under the earnings method, income is derived when it is earned. The point of derivation occurs when a 'recoverable debt' is created. 10. The term 'recoverable debt' is used to describe the point of time at which a taxpayer is legally entitled to an ascertainable amount as the result of having performed an agreed task.[F1] A taxpayer may have a recoverable debt even though, at the time, they cannot legally enforce recovery of the debt.[F2] 11. Whether there is, in law, a recoverable debt is a question to be determined by reference to the contractual agreements that give rise to the legal entitlement to payment, the general law and any relevant statutory provisions. Oh, I think I have stumbled across something even more helpful. This page on the ATO site is about accounting methods. I'm going to copy and paste it intact: Accounting MethodsThe amounts you include as assessable income in any income year depend on whether you account for your income on a cash basis or accruals basis.
Note: the two types of GST accounting methods, which are referred to as cash and non-cash, have a different purpose and should not be confused with the income tax accounting methods discussed here. Cash BasisIf you account for your assessable income on a cash basis you include payments received during the income year regardless of when the work was done. You only include the income you actually receive payment for during the year as assessable income.
Accruals BasisThe accruals basis accounting system includes all income earned during the income year even if you hadn't received payment for the work by the end of the income year. You should include all amounts you earn during the year as assessable income, even if payment for the work done is still outstanding at the end of the year. Example: Accruals method Dimitris manages his own business as a carpenter. He completed a contract in May 2018 worth $7,240 but his invoice wasn't paid by 1 July 2018. Using the accruals accounting method, he must include the $7,240 (less any GST) in his assessable income for the 2017-18 year. If I am interpreting this right, it is my choice which of these two methods I use in my personal accounting. I would prefer to use the cash basis method because it is much easier to track - I can always look at my bank account via the Greater app on my phone to check when a payment was received. Fun fact: Youth Allowance, Austudy and Age Pension are taxable payments. Fun fact 2: Just like any other source of income, interest you earn from a savings account is subject to tax. Fun fact 3: Generally, you do not have to declare rewards or small gifts such as cash birthday presents (however, gifts may be taxable if they are large amounts or you receive them as part of a business-like activity or in relation to your income-earning activities as an employee or contractor) Back to the ATOSo, returning to the question Select the type of payment which made up 75% or more of your personal services income (excluding any amounts you received as an employee). I have created a spreadsheet to calculate my earnings, and found that more than 75% of my commission work was
All the tools I needed were provided by me: Laptop, drawing software, operating system, tablet, ect ect. So I will click Yes. This question asks me if I have to pay to fix my mistakes, if I make any. The blue text link on fixing any defects gives the following information: Am I liable for the cost of fixing any defects in my work?Where a defect can be fixed, this requirement is satisfied if you are required to fix the defect at your own cost, or if you are required to pay someone else to fix it. Where the defect cannot be fixed, this requirement is satisfied if the client can sue you for damages. If you can invoice for the hours spent to fix defects in your work, you do not meet this condition. I have the ability to invoice for any such work. (Note their use of 'if you CAN invoice'. It's about ability, not whether you actually have done or will do). So I will be selecting No. This blog post is very long now, so I'll be splitting it here, and provide a link to Part 2 when it is done.
Until next time, xx Jess
1 Comment
Avalon
2/10/2023 09:08:32 am
I've used this to help me do my tax return every year for like the last three years 😭 thank you so much!!
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AuthorI'm just some Aussie 20-something year old with a lot of time and a lot of interests. Archives
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