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Freelancing and sole trading offer freedom, flexibility, and autonomy—qualities that are highly valued in today’s workforce. But with independence comes responsibility. One of the biggest challenges freelancers and sole traders face is staying compliant with tax and regulatory obligations. Mistakes or oversights in this area can lead to unexpected costs, legal penalties, and unnecessary stress.
This article outlines common compliance problems and provides practical solutions to help you run your business smoothly and confidently.
Unclear Legal Setup
Many freelancers jump straight into work without formally setting up their business. This often leads to confusion around legal obligations and issues when dealing with clients, tax authorities, or suppliers.
1. Solution:
Register for an Australian Business Number (ABN) as a sole trader. If your annual turnover is expected to exceed $75,000, register for Goods and Services Tax (GST). Setting up a separate business bank account can also help keep finances clear and organized.
2. Benefit:
A proper setup builds credibility, simplifies financial management, and ensures you are legally recognised as a business.
Poor Record-Keeping
One of the most common compliance mistakes freelancers make is not maintaining accurate and up-to-date financial records. This often leads to errors in tax reporting, missed deductions, or even ATO audits.
1. Solution:
Use cloud-based accounting software like Xero, MYOB, or QuickBooks to log income and expenses as they occur. Keep digital copies of all receipts and invoices, and reconcile your bank accounts regularly.
2. Benefit:
Clear records support accurate reporting, maximize your deductions, and reduce stress at tax time.
Inconsistent BAS and GST Reporting
Freelancers who are registered for GST must submit Business Activity Statements (BAS) regularly. However, many either forget to lodge them on time or lodge them incorrectly, risking fines and interest charges.
1. Solution:
Set calendar reminders for BAS deadlines and automate reports using accounting software. If you are unsure how to complete your BAS, consider working with a registered BAS agent or bookkeeper.
2. Benefit:
Timely and correct submissions help avoid penalties and keep your relationship with the ATO on solid ground.
Unpaid Super Contributions
If you pay yourself a wage, you are not legally required to pay yourself super—unless you operate through a company structure. However, voluntarily contributing to your superannuation is still highly recommended. Many sole traders also forget their responsibilities when subcontracting others.
1. Solution:
Factor super contributions into your business budget as part of long-term financial planning. If you hire subcontractors who fall under the ATO’s definition of employees, ensure you are paying their superannuation correctly.
2. Benefit:
Paying super not only prepares you for retirement but also keeps you compliant with changing super laws.
No Professional Support
Going solo does not mean going it alone. Many freelancers avoid hiring professionals to save money, but this often leads to compliance gaps.
1. Solution:
Engage an accountant or bookkeeper familiar with small business and freelance compliance. They can help you plan, lodge tax returns, and offer advice tailored to your situation.
2. Benefit:
Professional support ensures you are meeting all obligations while freeing up time to focus on your actual work.
Conclusion
Staying compliant as a freelancer or sole trader does not have to be overwhelming. With the right setup, tools, and expert support, you can avoid costly mistakes and focus on growing your business. Compliance is not just about ticking boxes—it is about creating a strong, sustainable foundation for long-term success.
