What does being a contractor mean?
- You are self employed
- You can choose what work to do, when and depending on the sector, where you do it
- You are responsible for paying your own taxes/insurance/superannuation
- There is no sick or holiday pay
- You do not get paid for public holidays that you do not work
- No putting aside enough for tax – put money aside every time you get paid
- Not getting advice upfront – get the experts involved early. Your accountant can help you decide the best structure to save you tax.
- Paying Tax and GST late – this costs you money on penalties and interest
- Not sending your invoices on time, if you don’t send it, you don’t get paid!
- Having your hourly rate set too low - Good rule of thumb, would be your old hourly rate + 25%
- Not making time for record keeping and administration
Other things to remember:
- Even if you are a contractor, you should have a contract of service with your client to set out the terms of the contract.
- You are expected to have your own equipment/tools that are needed for your job
- Getting loans and mortgages – this can be harder then when you are an employee, you will need to be able to demonstrate to the bank your work history and a forecast of your projected income for the next 12 months. The newer you are as a contractor, the less history you have.
- Insurance – You need to consider what happens if you can not work due to either an accident or sickness.
These simple tips will help if you are new to contracting and save you time and money in the future! Contact firstname.lastname@example.org if you have specific queries relating to contracting.