When I first became a tradie…
…I knew that I’d have to take care of my own taxes - but I was completely unprepared for the extent of financial admin that was required. Of the dozens of mistakes I made, here are the few that hurt the most.
Mistake #1: Registering a Company
I genuinely thought I needed to register a company to make it work, so I headed over to the Business Registration Service website to fill in some forms. Months later I discovered that sole traders don’t need to register as companies – I could just be an ABN Sole Trader, which I could have done for a lot less effort.
Sole traders can still register for GST, claim deductions, and pay exactly the same amount of tax if the money comes to them directly, rather than through a company.Worse still, I learned that by registering a company I had doubled my admin burden overnight. Not only did I have to do my own individual tax returns, I now also needed to do separate ones for my company.It took ages to unwind my company so I could return to being a sole trader. 🤦♂️
Mistake #2: Thinking I could ‘make money’ by holding on to my tax
My accountant told me that my tax funds could earn interest for me. He suggested I put aside 40% of everything I earned into a savings account. I asked if this was my exact tax rate - to which he replied:
Oh no, that’s just to be on the safe side. I won’t be able to work out how much you actually owe in tax until after the end of the tax year
My tax rate at the time was in the late-20’s, so by taking his advice I was holding back way too much - essentially depriving myself of my own money for 12 months at a time!On top of that, the money didn’t stay around long enough to generate any real interest for me. My regular payments out of the savings account - GST, and Income Tax - prevented me from holding the money long enough to earn any meaningful interest - made worse by how low the interest rates were at the time!On top of that, I hated not knowing how much of that money was actually mine. Looking back, it would have been far better to have those extra funds available to me as they came in, so that I could have a clear picture of my finances.
Mistake #3: Wasting time in Accounting Software
When I first got accounting software, I found the process of reconciling transactions to be satisfying. I soon realised that I was paying $40 a month, having to do a lot of work myself, and I had very little need for all the software’s bells and whistles.
I barely needed any of it - I needed so little in fact, that I started coming up with bizarre reasons to use different parts of it just to get my money’s worth. I’d add myself in as ‘Inventory’, I’d spend ages categorising expense transactions… and then at the end of the year my accountant would just print off an extract from the software, hand it to me and say “is this correct?”. 🙄
Mistake #4: Thinking an Accountant would do everything for me
I just assumed they would take care of it all for me. That’s their job, isn’t it? You pay them to do everything, so that you don’t have to think about any of it?Wrong.It turned out that I had to spend hours doing all the things accountants don’t do, including:
- entering data manually into accounting software (software I was paying for!)
- chasing invoices
- making tax payments
- and sorting professional insurance
…not to mention having to think (and know) about tax - all while still paying someone thousands every year…and for what?My accountant would surface once a year, do some sums, and say:
Here’s the amount of money you should have been saving for tax - I hope you haven’t spent it…
And then a few months later they would send me an invoice. It felt like I was paying my accountant for the work I was doing myself.
Then…
…after years of dealing with tax issues as a sole trader, I realised that thousands of others had already found the solution.
Hnry.
Hnry automatically pays and files taxes for Australian contractors, freelancers, and sole traders - so they never have to think about tax again. Income Tax, GST, Medicare, Student Loan - Hnry customers have peace of mind that they’re always up-to-date on their obligations.
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