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  • #978823
    Jond72
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    Hi everyone – I’m new to all of this business stuff and have some very basic questions.

    I’ve set up as a sole trader, registered a business name, set up my website etc. However, it has all happened very quickly and I’m doing it all on the fly!

    I’ve set up as a sole trader as I’m freelancing for a couple of companies and it seemed logical to invoice them for my services.

    However, a different client has engage me to do some consulting work for them. As part of this consulting, I need to engage a contractor to do some graphic design work for them. As is customary in my industry, I intend to add 20% on top of the graphic designer’s fee and charge this back to the client. Therefore, can I do the following…

    – Engage the graphic designer who invoices me and I pay
    – I then invoice my client for the work plus my 20% on top

    Does the graphic designer payment simply become a ‘cost’ to my company (an outgoing expense) and the payment from the client becomes a ‘payment’ to my company? And as long as I keep records for this and other similar transactions, my income will be worked out at tax time?

    I know this all seems very basic but I’m kinda out of my depth here. I just want to make sure I’m not taxed for whole amount I invoice for, as the income for me is only 20% of the amount on the invoice.

    All help greatly received.

    Cheers

    #1109802
    MyGreatIdea
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    Yes, you’ve got it. But you probably already know that, just need the confirmation, right? It’s always better to check things you’re not sure of – for peace of mind.

    Just keep all your invoices (both sales and costs) and the relevant business expenses will be deducted from your income when you do you tax return so you will be taxed on the net amount.

    You might find it easier to set up an Excel spreadsheet to record everything.

    Wendy :)

    #1109803
    JacquiPryor
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    Whilst at the end of the day, you’re right and will all be worked out at tax time etc as per your post, I believe there’s actually a difference between “cost of sale” and “business expense”… if you are using any sort of accounting package they will actually be listed separately in your accounts.

    The example you have given would see the payment to your contracted graphic designer a “cost of sale” rather than business expense, as it’s directly related to performing work for and invoicing the end client.

    #1109804
    Gordan
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    Credits and Debits. Money comes in. Money goes out.

    Just keep all your records for invoices and expenses and after a while it will all start making sense.

    #1109805
    Chris – Marketing
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    Hi make sure your graphic designer has an ABN. also if u have ticked GST when u registered your ABN don’t forget to add 10% on your quote. If this is the case start a seperate bank account to place some money if GST is to be completed anually. Monitor your income because tax time can cripple small business if not prepared.

    chris Poulios
    http://www.satisfaction-marketing.com.au

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