How a contractor tax accountant helps
A dedicated accountant for contractors starts by mapping how you earn income and where compliance risks sit. From there they set up a simple plan you can keep up with during busy periods.
- Tax returns for contractors: apply PSI rules correctly, separate business vs private costs, and time deductions.
- GST and BAS: register when required, choose cash or accrual, and lodge monthly or quarterly.
- PAYG instalments: smooth tax across the year to avoid bill shock.
- Superannuation: set your own contributions and understand when clients must pay super for you.
- Structure and asset protection: compare sole trader, company and trust for risk, admin and cost.
- Software and receipts: automate invoicing, bank feeds and receipt capture to reduce errors.
Key Australian rules contractors should know
- GST registration threshold is generally $75,000 turnover. If registered, add 10% to taxable sales and claim credits on business purchases.
- BAS lodgement can be quarterly or monthly. Choose a cycle that matches cash flow and record keeping discipline.
- Personal Services Income (PSI) may limit income splitting and certain deductions. Keep evidence for the results test, unrelated clients test, employment test or business premises test.
- PAYG instalments spread your income tax across the year. Monitor profits and vary instalments when needed.
- Super: if a contract is wholly or principally for your labour, your payer may be required to pay super for you even if you have an ABN. Clarify this in writing.
- Hiring others: if you pay subcontractors for services in reportable industries, you may need to lodge a Taxable Payments Annual Report (TPAR).
- Assets and equipment: deduction rules and instant asset write‑off thresholds change. Check current ATO settings before buying.
Deductions and records checklist for contractors
Claim only what relates to earning your income and keep reliable records. A focused accountant for contractors will help you set up repeatable tracking.
- Tools, equipment and repairs; depreciation for higher value items.
- Vehicle expenses: logbook method or cents per km; parking and tolls for business use.
- Travel for work: transport, accommodation and reasonable meals when overnight and work‑related.
- Protective clothing and PPE; laundry for eligible items.
- Software, job management apps and subscriptions; e.g. Xero, MYOB, QuickBooks, project tools.
- Phone and internet apportioned for business use.
- Home office: method and rates change over time; keep a work activity log.
- Insurance: public liability, professional indemnity, income protection (note deductibility rules).
- Licences, tickets, union or association fees, ongoing training to maintain skills.
Choosing the right structure
Structure affects tax, admin cost and risk. Match it to how you work today and where you are heading.
Sole trader
Simple and low cost. Income taxed at personal rates. PSI most commonly applies here. Add ABN and consider GST. Good for starting or staying small with low risk.
Company
Separate legal entity and different tax settings. More admin but adds risk separation. Useful when profits grow, there’s equipment or staff, or contracts require a company.
Trust
Can help with asset protection and flexibility in some cases. Adds complexity and costs. PSI can restrict distribution choices when income is mainly for your personal effort.
What to document
Engagement terms, invoicing basis (hourly, fixed price, milestone), GST status, super obligations, and evidence for PSI and deductions.
What to compare before you commit
Scope
Confirm tax return preparation, BAS and GST, PSI assessment, year‑round questions, and reviews before lodgement.
Software fit
Look for clear workflows in Xero, MYOB or QuickBooks, bank feed rules, receipt capture and invoice automation.
Turnaround and communication
Agree on response times, BAS lodgement windows, document requests and escalation during deadlines.
Commercial fit
Compare fixed fees vs hourly, inclusions, review rhythm and whether you need compliance only or broader advisory.
Best next steps
Write down the outcome you want: lodge an overdue BAS, set up GST, check PSI, optimise deductions, or plan a move to a company. Shortlist providers who explain the process clearly and show examples for contractors like you.
If you’re ready to move, send a short brief and recent records (invoices, bank statements, prior returns). That speeds up scoping and gets you a fixed price faster.
Frequently asked questions
Do contractors need to register for GST?
You must register when your GST turnover reaches $75,000 (non‑profits $150,000). If registered, add 10% GST to taxable sales, claim credits on eligible purchases, and lodge BAS monthly or quarterly. Choose cash or accrual to match how you invoice and get paid.
How do Personal Services Income (PSI) rules affect contractors?
PSI applies when most income is for your personal effort or skills. If PSI applies and you don’t pass the relevant tests (for example the results test), income splitting and some deductions are limited. Keep evidence for your tests and talk to an accountant for contractors to avoid errors.
What can contractors usually claim?
Common deductions include tools and equipment, PPE, vehicle expenses (logbook or cents per km), travel for work, software, phone and internet apportioned for business, home office, insurance, licences and training. Keep receipts and records that show the business link.
Should I be a sole trader or set up a company?
Sole trader is simpler and cheaper; a company adds risk separation and different tax settings but more admin. The right answer depends on profit, risk, client requirements and PSI. Get tailored advice before changing structure.