Simple tax question for sole trader

[Unknown Guest]

Hi,

I have just started doing some freelance work as a sole trader, and have a (very basic) question about what to claim for tax. I have an ABN but don't need to charge GST because I'm not carrying on an enterprise.

Example:
I got paid $500 for a service, but there was a $300 external cost which I paid for.

Do I:
a) Claim $500 income, and $300 deduction. Or
b) Claim $200 income

I guess I'm asking whether you claim your revenue or profit?

Any intro reading, links etc for freelancer tax info would be fantastic. As you can tell from the question, I need all the info I can get!

Thanks in advance!

[TehCamel]

you pay tax based on your profit.

So let's assume, you bought a $300 widget, which you sold for $350. You then also charged $150 for labour, to isntall the widget.

Depending on how your books are structured.. your financial statement shows Revenue of $500, and profit of $200

At the end of the year, when you finalise your books, you would pay tax on that $200 dependent on your marginal rate.

Personally, I withhold a full 50% of all my profit and put it in a high-yield savings account.

[Xavier Xi]

a) declare $500 income, and claim $300 in expenses.

happy to discuss obligation free.

03 8340 0405

[Steve_Minshall]

Originally Posted by TehCamel

you pay tax based on your profit.

So let's assume, you bought a $300 widget, which you sold for $350. You then also charged $150 for labour, to isntall the widget.

Depending on how your books are structured.. your financial statement shows Revenue of $500, and profit of $200

At the end of the year, when you finalise your books, you would pay tax on that $200 dependent on your marginal rate.

Personally, I withhold a full 50% of all my profit and put it in a high-yield savings account.

Why put it in a savings account and wait a year to get 6% when you could buy and sell another widget and get 17%. You may not even have to pay it to the ATO for over a year. You could buy and sell lots of widgets in that time. You don't need a savings account you just need to manage your cash flow so that its available on the day the tax man wants it.

[TehCamel]

because I don't buy and sell widgets at the moment. I provide services.
if I needed to buy and resell a widget, I would obviously use the funds in the savings account (and this is the other purpose for it - I'm building up a surplus so I can buy widgets)