One Writer’s Guide to What Freelancers Can Claim on Tax

When you freelance, taxes can be a headache. Zoya Patel breaks down what creatives can claim on tax.

Look, there’s a reason why we’re in the creative industries – words, images and ideas excite us, and numbers have the curious ability to just turn our brains right off. If you’re a freelancer, then tax time can feel like a looming pit of despair each year. You know that you can be smarter about the deductions you claim, but you have no idea where to start (and probably not a whole lot of extra dosh to hire a tax agent to sort it out for you).

Whilst I am not a financial advisor (take that as your disclaimer), I have had to figure this stuff out for myself. Before we get into the good stuff aka. deductions, here are a few lessons I’ve learnt about tax as a freelancer:

It’s important to know if you actually need to pay tax!

Not everyone who gets paid to write or for other creative arts needs to register as a sole trader. If your creative pursuits are largely a hobby, and not a regular source of income, you can attach a Statement by the Supplier form so that the organisation paying you and the ATO know that this is an occasional source of income, and that your art is ‘a hobby’. There are specific guidelines around the use of this form, which are on the ATO website. However, if you are regularly freelancing and actively seeking paid opportunities, you should register for an ABN, and be aware of your obligations.

You’ll get less of a nasty shock at tax time if you budget for your tax obligations throughout the year.

Sole traders have to pay income tax along the same rates as other forms of employment. This means it’s good to forecast what you expect your annual income to be, and calculate what percentage you’ll need to pay back in tax so you can keep the funds aside. Alternatively, you can apply for PayG instalments, which means the ATO will assess your past tax returns and allocate a quarterly payment amount (and anything over your obligation will be refunded at tax return time). If you’re like me, and have very little head of calculating percentages and doing a budget forecast (I pretty much only check my balances to make sure I can still afford Netflix and coffee), you can just allot a percentage of each payment you intend to keep aside for tax (I generally take aside 10% - it’s not a foolproof method, but it’s easy for me to remember and action).

Don’t forget that HECS debt!

If you went to university and got a really enjoyable but vocationally meaningless Arts degree like I did, don’t forget that your HECS repayments are calculated based on your income bracket too. If you have a regular job on top of your freelance income, the boost from freelancing can sometimes push you into a different HECS repayment bracket, so you could get a bill at tax time. Best to keep an eye on this, or make additional repayments to your HECS to manage the shortfall!

Now it’s time to claim, claim, claim!

As a sole trader, you’re able to claim tax deductions for business expenses. And when it comes to writing, this can be broad! Some key things you can definitely claim are:

1. Your laptop/other equipment like a printer, or camera you use for blog images, and depreciation on those items each year (this is complicated to calculate but there are online tools that can help).

2. Books! I claim all the books I buy, because being well read and across industry happenings is vital to being a good editor/writer. This is captured under ‘professional libraries’ for business-related tax deductions.

3. Any work-related travel. Keep those train tickets/petrol expenses for driving to and from engagements like workshops, events, or meetings.

4. Stationary you need for work and any office furniture etc that you may have bought for your home office. This could include everything from your post-it notes and pens, through to your desk, bookcases and filing cabinets.

5. ‘Home office’ expenses. This one is a bit tricky, and does require you to have a separate room from a bedroom that’s designated for work. You then need to calculate the percentage of the overall house that room accounts for, and then you can figure out a percentage of rent and power costs associated with the office. You can also claim internet, but you need to have a sense of hours spent using the net for work. You are required to keep a fair bit of evidence for this, so it’s definitely worth reading up.

Again, I am certainly no financial adviser, but it’s definitely worth being savvy about your tax obligations. If nothing else, it means you’re prepared for any additional tax you need to pay come tax return time, and you can make sure that you’re getting the tax deductions you’re entitled to!

You can find out more on the ATO website.