Starting your own business is a big step towards financial freedom, but it also comes with its own set of financial challenges. When you're no longer receiving a regular paycheck, it's crucial to have a solid plan in place to manage your money and ensure financial stability. Here are some of the most important aspects of finance for the self-employed that you need to consider.
Superannuation Contributions
As an employee, your employer takes care of making superannuation contributions on your behalf, but as a self-employed individual, you need to make these contributions yourself. This is an important step towards securing your financial future, as you'll need these funds to support you during retirement. Additionally, up to $25,000 of your super contributions can be claimed as a tax deduction.
Paying Yourself a Regular Wage
It's easy to get tempted to mix personal and business expenses when you're the only one involved in your business. To avoid confusion and ensure a clear picture of your finances, it's advisable to pay yourself a regular wage, just as you would if you were an employee. This will also help you better manage your cash flow and keep your personal and business finances separate.
Entitlements and Insurance
As a self-employed entrepreneur, you don't have the same entitlements as an employee, such as paid leave and sick pay. This means you need to prepare for quiet periods and unexpected situations by setting aside funds and arranging insurance. For example, you may consider getting income protection insurance to safeguard against illness or injury. The good news is that insurance expenses are tax deductible.
ATO Obligations
As your business grows, you may be obligated to report to the ATO for GST and PAYG registrations, especially if you earn over $75,000 per year or have employees. It's essential to keep track of these deadlines and set aside funds for these payments, as failing to do so could result in penalties and fines. Consider opening a separate bank account for these purposes to avoid confusion and ensure that you have the necessary funds available when they're due.
In conclusion, managing your finances as a self-employed individual can be challenging, but with the right planning and support, it's definitely achievable. If you need help getting started, the team at iBusiness Group is here to assist you. With years of experience in business consulting, accounting, and taxation services, we can help you achieve financial independence and take your business to the next level.
