I have just moved from being an employee to a contractor – same role with greater flexibility. My question is what percentage of my income should I put aside for tax and is there anything else I need to consider, thanks?
There are plenty of things to consider such as Super and Workcover but also the time and cost of maintaining your business compliance.
It does depend how high your income is and how many expenses you will be paying yourself. I would start at 30% and that should cover tax and costs of compliance up to about $120k per annum.
You will need to have a closer relationship with your accountant so I would suggest you go and spend an hour with them and iron everything out at the beginning so you don’t get surprised or caught out down the track
Best of luck
Graham Doessel - CEO - MyCRA (Specialist Credit Repair) Lawyers (LPH)
Current Rating: 4.65 / 5
There's a whole heap of red flags that come up here for you and for your employer.
If you are doing the same job now on a contract that you were doing as an employee, you might need to look at the rules around personal services.
There is a risk that you might still be deemed an employee.
Worth taking the time to look it up and check it out.
this factsheet put our by CPA is a good start.
I have a really good saying that was given to me by a very clever barrister once...." if it walks like a duck and quacks like a duck, then chances are its probably a duck."
you have gone from being an employee on the payroll, to a contractor. The ATO will take one look at this and thing two things:
1: your employer is looking to dodge super and workers comp
2: you are looking to claim a whole heap of expenses that you probably shouldnt.
soooooo be very very careful about what you do in your own tax return. And make sure that your employer is actually fulfilling his obligations re super and workers comp!!!
and talk to your accountant about what you can and cant do and what you SHOULD and SHOULDNT do!!!!
Brendan Curran is on the money here - check this is the right format for you, and you are being compensated properly.
Regarding the tax, speak to your accountant to get a good handle on it. It depends heavily on the level of tax deductions you would be claiming against your income. They really aren’t much/any different to claiming as an employee.