As the old joke goes, nothing’s certain in life except death and taxes. While we can’t help you with that first bit (sorry!), the good news is that we are all over that second part.
We know from experience that the best way for sole traders to (legally) save in tax is to claim all the expenses they’re eligible for. But research shows more than half of all sole traders aren’t claiming everything they’re entitled to – and that’s easy money left on the table!
Enter Hnry. Our service is built around sole traders and their pain points:
- Struggling with your expense admin? Boom, the Hnry Business Mastercard automates it.
- Constantly losing your receipts? We store them for you – for the ATO-required five years.
- Not sure what you can claim? We have more resources than you can shake a stick at.
- Need extra help? Our devastatingly charismatic Customer Service team is here to help.
But hang on, we’re getting ahead of ourselves! Let’s walk through how claiming expenses actually works, how tax deductions affect your tax rate in Hnry, and how to really make the most of your tax savings.
We know, we’re talking about taxes here – but you are in for an absolute treat.
Tax deductions 101
You’ve probably (ok, definitely) heard the words “business expenses” and “tax deductions” before. But what you might not know is that those two terms technically refer to different things:
- Generally, business expenses are any purchases you make in order to run your business.
- Tax deductions refers to costs you can claim to lower your taxable income, which in turn lowers the amount of tax you may be liable to pay.
📖 If you’re curious to learn more, we explain it all in detail in our guide to tax deductions for sole traders. Check it out!
Sole traders can claim eligible business expenses as tax deductions – the best way to (legally) pay less tax. Here’s how it works:
Death is a Soul Trader, earning $75,000 annually in self-employed income. In order to do business, he regularly needs to repair, maintain, and occasionally upgrade his collection of scythes.
Death spends $7,000 a year taking care of his scythes. He claims the cost as a tax deduction. This reduces the amount of income he owes tax on from $75,000 to $68,000.
At $75k, Death’s effective income tax rate was 17.7%, and he would have had to pay the ATO $13,288 in income tax. By claiming a tax deduction of $7,000 and reducing his taxable income to $68k, his effective tax rate becomes 16.5%, and his tax bill is $11,188.
That’s a tax saving of $2,100 just from this one deduction claimed!
📖 For more information about which business expenses count as valid tax deductions, check out our guide to business expenses for sole traders.
How tax deductions work in Hnry
Alright, so now you know how tax deductions work in general. But how does Hnry handle tax deductions?
Great question, because this is where the real magic happens – and it’s a major benefit of using Hnry.
Most people treat expenses as something they deal with at tax time. The typical approach goes something like this:
- Save up all receipts during the year (maybe losing a few in the process),
- Send everything to your accountant near the end of the financial year, and
- Hopefully see the benefit months later in the form of a tax refund.
But this approach means you’re generally overpaying your taxes throughout the year – essentially giving the ATO an interest-free loan. You could definitely be putting these savings to better use.
That’s why Hnry is built around raising expenses as you go. Every time you raise an eligible business expense in the Hnry App, we adjust your tax rate in our system accordingly, so you’re only ever paying what you actually owe.
The best bit is that we pass on these tax savings to you in real time. You get your hard-earned cash on hand to spend on your business immediately, instead of maybe getting a refund once the financial year’s over.
Think about it – you get more money in your pocket, sooner, so you can make it work harder for you. What’s not to love?
Expenses made easy with Hnry
According to research, more than half of all sole traders are not claiming all the expenses they’re entitled to. That’s easy money left on the table!
We don’t want our customers to be amongst those that miss out. That’s why we’ve made it dead easy to raise expenses as you go – that way you’re less likely to miss out on any potential tax savings.
Here are the three Hnry features we built specifically with sole traders in mind, to maximise tax relief:
1. The Hnry Business Mastercard
It’s so simple: Every time you make a business purchase using your Hnry Business Mastercard, it automatically raises that purchase as an expense in the Hnry App.
All you need to do is upload a photo of your receipt, add in a few details, and you’re done. Expense raised!
We even store that receipt for you for the ATO-required five years. No more frantically trying to find your receipt stash come tax time – it’s all taken care of.
2. Hnry Expenses
If for whatever reason you can’t use the Hnry Business Mastercard, you can still manually raise an expense in the Hnry App – and it’ll still take you less than a minute from start to finish.
In the Hnry App, hit “Create new” under the Expense tab. From there, it’s the same process – upload a receipt, add a few details, hit submit. Easy!
3. Mileage by Hnry
For those of you claiming vehicle expenses, we built Mileage by Hnry. It automatically tracks and records work-related travel, so you can keep a logbook for the ATO, or export trips to be raised as an expense in the Hnry App.
Once set up, it’s basically set-and-forget. Better still, it’s available free for all current Hnry users!
Death uses all three Hnry features – the Hnry Business Mastercard, Hnry Expenses, and Mileage by Hnry – to raise expenses as he goes.
The Hnry Business Mastercard is a god-send for when he’s making purchases on the go – everything he buys is automatically raised in the Hnry App, ready for him to submit when he’s not busy chasing clients.
On rare occasions cards aren’t accepted (like at his favourite antique hourglass store), Death pays for business expenses in cash. He’s made it a habit to raise these expenses in the Hnry App immediately, including uploading a photo of his receipt before he loses it.
Finally, Death often needs to travel for work. He uses Mileage by Hnry to track his business trips, regularly exporting them to the Hnry App.
Apart from the immediate tax savings, Death knows from experience that if he doesn’t sort his expenses as he goes, he’s going to forget to do it altogether. After all, Hnry’s only been around for the past few years – and old habits die hard.
Getting help with expenses
Knowing what you can and can’t claim is one of the top reasons sole traders say they aren’t claiming all the tax deductions they’re entitled to. And we totally get it – sometimes, it really is hard to know whether or not a claim is valid according to ATO rules.
As a starting point, we’ve put together a bunch of general guides to help you understand what you can and can’t claim:
- Tax deductions 101
- How to claim vehicle expenses
- The sole trader guide to depreciation
- Home office expenses for sole traders
We also have industry-specific guides for expenses you can (and can’t!) claim:
- Freelancers
- Contractors
- Tradies
- Content creators
- Healthcare workers
- NDIS support workers
- Doctors and locums
- Nurses and midwives
- Psychologists, counsellors and psychiatrists
Happy raising!
Get in touch with the team
If you’re really stuck, the Hnry Team is on hand to answer your gnarliest tax questions. We’re specialists in sole trader taxes, and trust us when we say we really have heard it all before!
We manage your expenses for you
Finally, once raised, we manage your expenses for you. This means passing on the tax relief in real time – but it also means we will let you know if any of your raised expenses are maybe not eligible for a tax deduction.
You can rest easy knowing that we’ll help you stay on the right side of the ATO.
Four reasons to claim expenses as you go
We really do believe that raising expenses as you go is the best way to save on your tax bill.
But if you’re still not convinced, here are four reasons it’s a good idea:
1. More money in your pocket, sooner
Raising expenses in Hnry as you go means more money in your pocket, sooner. We’ll start deducting less tax from your very next pay, which you can save, invest, or spend as you like.
We get it, we all love the refund-funded trip to Bali at the end of the financial year. But for most sole traders, having cash on hand when you need it beats giving the ATO an interest-free loan any day.
2. Better visibility of your real income
The income and expenses graph on the Hnry Dashboard is a snapshot of your monthly profit. But it goes without saying, it’s not going to be accurate if you’re not raising expenses in real time!
When your expenses are up to date and the right amount of tax is being deducted from your pay, you get a much clearer picture of what you’re actually earning vs. what’s going to the ATO. It takes the guesswork out of your business finances.
3. Fewer missed deductions
Let’s be honest – it’s easy to forget about a purchase you made six months ago. Recording expenses as they happen reduces the risk of missing legitimate deductions and avoids the end-of-year scramble to dig up old receipts.
4. Easier to stay compliant
When you add an expense in Hnry, you upload a photo of the receipt, creating a digital record of the purchase. That receipt is stored alongside the expense in Hnry, helping you maintain the records required by the ATO. Simple as that.
Claim tax deductions with Hnry
We may be biased, but we reckon the best way for sole traders to maximise their tax deductions (cost-effectively and legally!) is to use Hnry.
Hnry is an award-winning app that’s helping sole traders in every industry spend less time on financial admin, and more time doing what they love.
(Unless what they love is financial admin).
For just 1% +GST of your self-employed income, capped at $1,500 +GST a year, Hnry will calculate and pay all your taxes, levies and whatnot for you, including:
We also complete and lodge your tax return for you, including claiming any tax relief you might be entitled to. It’s all part of the service!
More importantly, we free up hundreds of hours for you to focus more on what you do best – your job. Hnry is on a mission to make being a sole trader simple, affordable, and accessible for anyone.
Get your tax ducks (and deductions) in a row by joining Hnry today!