Sole Trader Tax Time Tips: Avoid These Mistakes

As a busy sole trader, we know tax time can easily be overlooked amidst other pressing business priorities. At Cotchy, our mission is to simplify accounting and ensure small businesses like yours stay compliant. That’s why we’re sharing these essential sole trader tax time tips to help you avoid common mistakes and get your return right. After all, the last thing you need is an unexpected tax bill or audit from the ATO.

Some of the key trouble spots we often see sole traders stumble on include:

Reporting All Your Income

Make sure you’re including any income earned outside your core business activities, such as non-monetary payments or payments in kind. It’s easy to overlook these, but the ATO expects full visibility of your total earnings.

Be diligent about separating business and personal expenses. It’s common to overstate the cost of goods sold or other operating costs. Keep meticulous records to back up your claims.

Calculating business losses correctly and applying the non-commercial loss rules can be tricky. We recommend consulting a tax professional like the experts at Cotchy to ensure you maximise your deductions.

Things like PAYG withholding refunds and reporting personal services income (PSI) are easy to mishandle. A small mistake here can lead to big headaches down the line.

To help sole traders like you stay on top of these requirements, the ATO have created a handy Tax Time Toolkit for Small Business. It’s packed with links, tips, and tools to simplify your tax preparation.

You can also leverage the ATO app’s myDeductions tool to capture expenses as they happen, making tax time a breeze.

And if you’re unsure about your record-keeping obligations, take the ATO’s free online course: Essentials to Strengthen Your Small Business.