Minding your own business
Many of us dream of being our own boss and, with hard work and
careful planning, self-employment can bring financial and lifestyle
rewards - along with enormous personal satisfaction. But, without
the security of a regular wage or salary, running your own show
calls for careful money management.
Manage your cash flow
Many self-employed Australians earn a good living. But, while
your overall annual income may be strong, the flow of money is not
always regular. It can be weeks and even months between pay
If you buy second-hand equipment, machinery or vehicles for your
business, check the Australian Government's Personal Property Securities Register
(PPSR) to make sure there's no money still owing on it.
Pay yourself a wage
Rather than treating all the income you earn from your business
as your personal spending money, pay yourself a weekly wage. You
should also maintain separate bank accounts for business receipts
and personal spending.
Deposit or transfer your business revenue into a high-interest
account, and only draw on this account to pay yourself a set
amount as a wage, or to pay actual business expenses. Putting your
business earnings in a high-interest account is a simple way to
earn extra income through interest.
Set a personal budget to help you live within your wage, and so
that you don't dip into business receipts too often.
Compare your wages to your spending.
Plan ahead for holidays
As a self-employed worker you won't enjoy the benefit of paid
holidays: it's up to you to set aside funds. Saving a little extra
on a regular basis will help you manage during any quiet business
periods, as well as funding a well-deserved break.
First Business app
Thinking about going into business for yourself? ASIC's First
Business app can help you as you move towards starting your own
business. The app provides tips and things to think about,
checklists, case studies and links to additional small business
Set aside money for tax
A common pitfall for small business owners is failing to set
aside money for income tax. As you become more established,
the Australian Taxation Office (ATO) might also require you to make
quarterly pay as you go (PAYG) tax instalments. Use the ATO's PAYG instalment calculator to estimate
how much tax you'll have to pay.
If you don't meet your tax obligations each year, you could pay
hefty penalties. Talk to your accountant and read ATO: Due dates for lodging and paying your
BAS. At worst, the ATO can take legal action, including winding
up your company or bankrupting you to recover unpaid taxes.
Unless you plan ahead for tax, it can be difficult to pay tax
bills when they fall due. So, it's worth making this a priority for
Keep on top of your tax obligations by opening a separate
savings account and regularly deposit part of your takings into
this account. It can take discipline not to dip into the account,
but a good incentive to leave the money aside until you need to pay
tax is to remember that the ATO can charge high penalties for late
Don't forget GST
If your business is registered for Goods and Services Tax (GST),
you will also need to set aside money for that.
Self-employed people often earn a decent income while working,
but without the benefit of employer-paid superannuation
contributions, find they have very little money to live on in
Don't rely on selling your business to fund your retirement.
Without your involvement, your business may be worth less than you
think. Many business ventures can also be hard to sell. Instead,
think about building a separate pool of retirement
Save for retirement, save on tax
Superannuation is a tax-effective investment for retirement
savings. Adding to your super can also reduce the tax on your
You may also be eligible for the government super co-contribution. For more information
see super for self-employed
As a guide, you or your business may be able to claim a tax
deduction of up to $25,000 annually for contributions to your
superannuation fund. It's an easy way to trim your tax today while
building a nest egg for the future.
Be sure to make your contributions before 30 June to claim them
as tax deductions, but be careful not to go over the contribution
caps so that the penalty tax does not apply.
Protect your income
One hazard of running your own business is being unable to work
due to illness or injury. Without sick leave, your financial
situation could take a turn for the worse if you become sick or
protection insurance can help you financially if you can't work
because of illness or injury. It's worth thinking about when you
run your own show because bills don't stop if you're unable to
Premiums for income protection insurance are usually
tax-deductible, which helps reduce the cost. Most large insurance
companies offer income protection insurance, or you might be able
to buy it through your superannuation fund. Do an internet search
to compare different income protection insurance products and
Keep control your cash, and draw a line between
your personal and business' money, to help you make the most of
Last updated: 13 Feb 2019