The Freelancing Diaries: A self-employed creative’s guide to the End of Financial Year
This year we’ve teamed up with Hnry to bring you ‘The Freelancing Diaries’, a series helping freelancing creatives navigate self-employed life and find their version of financial success.
This quarterly content series is chocka with freelancing business tips to help you navigate running a creative business, as well as de-mystifying some of the barriers for those considering taking the leap.
With the end of the financial year ( EOFY ) right around the corner, this month we’re focusing on the top tips self-employed creatives need to know when it comes to how to plan for the new financial year.
Get ahead for 2024 – register here to attend the Free webinar: ‘Preparing yourself for the end of the financial year’ we’ll be hosting on 28 February w/ Hnry and bring your EOFY questions!
You know what kind of blew our minds?
When we read that ‘Kiwi sole traders spend an average of 6 hours a week and up to $246 a month managing their tax and financial admin.’ – source: Hnry
That’s ~ $3,000 a year and ~316 hours of our lives we never get back…
And it begs the question, as creative freelancers, is this really where we want/should be spending our precious – and often limited – resources?
So in an effort to make your life a little bit easier this tax season, we’ve put together a checklist and a few top tips you can use to navigate the 2023/24 end of financial year.
The Creative Freelancer End of Financial Year Checklist
1. Know what $$ you need to set aside.
First off, you can expect to need money each year to pay for: IRD, ACC, KiwiSaver, and yourself ( you may also need to consider GST too if you’re above the earning threshold ). So creating an annual budget can be a helpful way to help you plan ahead to avoid getting caught out.
The word ‘budget’ probably makes most of us curl the upper lip in disgust BUT it doesn’t have to be a complicated ordeal. Even just accounting for some of the basics is a great place to start with a financial budget.
Here are some of the top things to consider:
Payments to the IRD:
As a creative freelancer or sole trader, you’re responsible for:
- Income Tax: your tax rate is calculated by adding up all of your sources of income for the year ( yes, that includes any salary/wages, investment income, and self-employed income ). Use this resource for calculating your tax rate once you have your total income added up to get an idea of what you’ll need to set aside for the year.
- GST: If you earned over $60,000 from your self-employed income ( do not include your salary & wages ) then you are required to register for GST. For those registered, you’ll need to charge for and claim GST on your sales and expenses throughout the year. Use this resource article to understand how GST works as a freelancer/sole trader. As a good rule of thumb – set any GST money paid to you aside so you have it readily available when it’s time to pay your bill which varies depending on your GST period.
- Student Loans: If you have an outstanding student loan, and you earn over the annual threshold of $22,828, then you’re required to make repayments on that student loan – which is 12 cents of every dollar you earn above the repayment threshold.
Payments to ACC:
As a creative freelancer or sole trader, you’re responsible for calculating and paying:
- Earner’s Levy: is a flat rate of $1.53 per $100 of your liable income
- Working Safer levy: is a flat rate of $0.08 per $100 of your liable income
- Work levy: is based on the industry you operate in. The riskier your line of work, the higher this levy will be
For more info on ACC, we shared this ACC freelancer guide earlier this year.
HOT TIPS
Use Hnry’s Income Tax calculator to quickly calculate your tax rate, (approximate) ACC levies, student loan repayments, and KiwiSaver contributions.
OR, you can just say bugger it and let Hnry do it all for you.
Time spent not earning:
Despite our best efforts to reach our business goals, life will sometimes get in the way. We need to make sure we have a rainy day fund to cover both the expected and the unexpected. Consider creating a rainy day fund to cover both the expected and the unexpected. Here’s where to start:
- Public Holidays: Aotearoa NZ celebrates 11 national public holidays, and one regional public holiday, for a total of 12 days off
- Personal Holidays: Are you taking a holiday this year (you absolutely should)? Give yourself some ‘annual leave’ and factor ‘paid’ time off into your budget.
- Sick Leave: PAYE employees get 10 sick days a year. Even if you don’t need it, knowing you have 10 days worth of income stashed away can make falling ill less stressful.
- Slow Periods: Many industries have slumps in activity at certain points in the year. If you know when yours are, you can compensate by putting more aside during busy periods.
For more tips on planning leave, check out Hnry’s guide to taking time off.
2. Claim your biz expenses ( and thus reduce your tax bill )
But be careful to only claim what you’re allowed to claim – otherwise, you risk playing the IRD lottery.
So how do you know what’s ok to claim and what isn’t?
As a general rule, you can claim a tax deduction for a business expense as long as:
- the expense relates directly to earning income,
- or running your business.
If you’re still unsure about whether you can claim specific expenses for your business, ask a tax specialist. For additional information on business expenses & sole traders, check out this guide.
PS – save down & have a filing system for your receipts. This can be as easy as snapping a quick photo and uploading it to somewhere like Google Drive OR if you’re a Hnry user straight to the app.
Can’t bear the thought of doing any of the above?
There are two types of people in this world – those that prefer to wrestle their own tax admin & those who’d prefer to outsource as much of the damn thing as possible.
If you’re in the latter, then you could probably think of a thousand other things you’d prefer to be doing right now – mimosas on the beach, catching up on the latest Netflix series, how about just sleeping?
Instead of beating your head against a wall trying to work out how much money you’ll need to set aside for the likes of IRD & ACC this year.
So, if you’re in that camp then consider switching over to Hnry.
They’re a no-fuss tax service and app for sole traders who help you with all your financial admin – from getting you paid on time, calculating and paying all of your taxes and even putting money aside for you including:
- Income tax
- GST payments
- ACC levies
- Student loan repayments
- KiwiSaver contributions
They even file your annual tax returns all as part of the service!
Got more questions about the End of the Financial Year you want answered? Register for the Free webinar coming up on 28 Feb. We’ll hear from the experts at Hnry on how to prepare for the EOFY with time for Q&A at the end.
*DISCLAIMER: The information on our website is for general educational purposes only. It doesn’t cover all situations and circumstances, and shouldn’t be taken as direct tax advice. If you’re looking for specific help with your taxes, join Hnry and their team of experts can provide you with assistance tailored to your business needs.
