Navigating the End of the Financial Year as a Self-Employed Worker

While the end of a financial year usually comes and goes without much fanfare for most salaried workers, it can be an extremely busy and stressful time for those that are self-employed. Freelancer Rachel speaks from experience and outlines ways to maneuver your finances through an important part of the tax calendar.

In the Southern Hemisphere, summer is over. Autumn has arrived, bringing with it crisp mornings, changing colors, and of course, the fast-approaching EOFY, or the end of the financial year. No worries! With a little preparation, this impending financial milestone shrinks from an anxiety-inducing mountain to something way more manageable.

Now for the sake of example, let’s say you’re a self-employed cat sitter. Not a catnapper, that’s different. A cat sitter. Okay? Great. Here are some areas to focus on:

Check in with your accountant

If you use an accountant or a tax agent, whether in-person or digital, now’s a great time to check in with them. Personally, I use digital accountancy service Hnry, which is designed specifically to streamline the admin and tax side of freelancing. 

Get clear on your tax obligations before you hit crunch time. This may include income tax, goods and services tax, ACC levies (in case of accidents, like tripping over your clients,) or student loan repayments (from that Bachelor of Feline Psychology.) It not only helps for the current fiscal year but will give you a head start on what to expect in future years.

Declare your income — all of it

Whether self-employment is your main gig or one of many side hustles, you’ll need to declare any income earned from it. You’ll also need to declare income from PAYE jobs, government benefits, superannuation, or anything else that may affect which tax bracket you fall into. A lot of the time, your local tax department will already have records of this.

I use nesting categories in PocketSmith to keep different streams of income organized. They’re a great way to tell at a glance where everything is and how much you’ve earned in various areas. A parent category for “Self Employed Income” could have nested sub-categories for “Cat Sitting” and “Dog Walking”. These categories then have sub-categories of their own for each of your clients. As a bonus, this way you can easily see who your big earners are — and target them for repeat business.

Check your GST threshold

This will differ by country, but here in New Zealand, self-employed workers providing goods or services must register for Goods & Services Tax when they earn over $60,000 a year. This means they charge 15% GST to their customers, which is collected and paid through to the IRD. They must also keep GST records for a period of seven years. Kiwis can read more on charging GST on the IRD website.

Submit those business expenses

As a self-employed worker, there are tons of things you can submit as business expenses for tax-deductible purposes. If you work from a home office, say for those all-important video calls to meet new cat sitting clients, you can expense up to 24% of your rent or mortgage interest. Power, internet, home insurance… Hnry has a great guide to household expenses, and the IRD covers it as well.

You can also submit business vehicle expenses, entertainment expenses (for that business lunch over puppaccinos), and depreciation on capital assets. So dig out those receipts from the shoebox under the bed, or check your labeled PocketSmith transactions. You remembered toattach your receipts, right? You can even email these straight to your PocketSmith account.

What about those activewear shirts that inevitably get covered in cat fur? Unfortunately, you can’t claim clothing as a business expense unless it’s “specialist clothing,” like a branded uniform.

Look back and plan ahead

Retirement contributions and charitable giving are two areas that can be easy to miss in the rollercoaster of self-employed life. 20 or 30 years is a long way away, right? It’s even longer in dog years! But there’s no better time to take a good look at these than now.

You won’t get employer contributions as a self-employed worker, but you could be eligible for a government match on your personal contributions. In New Zealand, this is a 50% match on your first $1,043 contributed every year. Looking ahead to next year, you could set this amount as an annual budget for a dedicated “Retirement” category, and transfer $87 a month. Where else can you get a guaranteed 50% return on your money?

Charitable giving is often tax deductible. Many churches, animal shelters, and other registered charities give a 33.3% tax credit or refund at the end of the financial year. All you have to do is collect your giving receipt from the charitable organization and submit it to your tax department. In New Zealand, this can be done online in MyIR under Donation Tax Credit. Even better, you can do it at any time up to five years after the donation has occurred.

So there you have it: A bundle of ways to make EOFY easier this year and into the future. Hopefully, they help to make that mountain into more of a molehill. And hey… maybe it’s not so much like herding cats after all.

Rachel E. Wilson is an author and freelance writer based in New Zealand. She has been, variously, administrator at an ESOL non-profit, transcriber for a historian, and technical document controller at a french fry factory. She has a keen interest in financial literacy and design, and a growing collection of houseplants (pun intended).

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