If you are a sole proprietor and have never filed a tax return before, it can be a daunting task. With so much information to collate, you might feel overwhelmed by the prospect of filing your tax return on your own. Just remember: any professional can help you with the arduous task of getting through the financial maze and filing your sole trader tax return.

Who is the Sole Trader?

A sole trader is someone who owns and operates their entire firm, which is also referred to as self-employment. One person will be wearing all the hats necessary to run a firm, including those of the company, the boss, the accountant, the marketing manager, the sales executive, and others.

After paying taxes, the person will keep all business profits. It is what sets sole proprietorships apart. However, they are solely responsible for and liable for any losses.

What Is the Difference Between a Sole Trader and a Company?

The tax-free threshold and the tax rates are the primary differences between operating as a sole proprietor and as a corporation. A tax-free threshold is available to you if you opt to work as a sole proprietor. Therefore, this is a wise course of action if you're running your firm as a little side gig. Since there is no tax-free threshold for businesses ($18,000), every dollar of profit is subject to taxation.

In contrast, businesses pay a predetermined tax rate of between 27 and 30% depending on the firm, whereas sole proprietors pay an individual tax rate; therefore, incorporation is something to take into consideration if your business has a sizable yearly turnover.

In contrast to corporations, which must also file a corporate tax return each year in addition to individual tax returns for their directors and workers, sole proprietors are also required to file individual tax filings.

Does a Sole Trader Need an Accountant?

Sole proprietors run every part of their firm themselves, which can get exhausting at times. In addition, if the person struggles with math, there is a significant likelihood that the job will contain errors, and they cannot afford that either. It is one of the factors that make a Parramatta tax agent necessary for a sole proprietor.

A Tax Accountant Can Assist a Sole Proprietor:

  • Keep Track of the Money Flow

Once you have followed the fundamentals correctly, it is time to start working. For a firm to be managed and expanded successfully, cash flow is crucial. Accurate cash inflow and outflow records are required.

There are two ways to record transactions: cash and accrual. Contrary to the accrual technique, which records events as they happen, the cash method requires you to record transactions when money is paid or received.

A single error in your tax return could result in severe fines. Commercial enterprises cannot afford this. Additionally, you must file your taxes within the government's deadline, or else you may be fined. Even when you make an effort to stay on top of everything, filing taxes won't be simple. They are experts who know exactly what to do and what not to do. Using a tax accountant in Parramatta is the best and most straightforward approach to doing your taxes.

  • Save Money

It could seem like an investment to choose a self-employed accounting service, but did you know that you can claim a tax benefit for it? Tax deductions have been made available by the ATO for a number of costs that businesses often incur, including the salaries of accountants. To do the task, you might hire a tax accounting agency. Despite hiring an accountant, you are saving a tone of money.

  • Save Time

If you don't come from a financial background, it might be difficult and time-consuming to understand specific phrases and financial data. You must conduct extensive research. But all of these phrases and paperwork are already common knowledge to an accountant. They can complete the papers quickly and even explain these words to you without many studies.

Conclusion

When a sole proprietorship business is just starting up, the owner is busy learning the process of creating, marketing, and selling their goods or services. It is advantageous to hire a Parramatta tax agent. They help you file your returns on time, get your accounts in order, and make the most of tax-deductible business expenses. Once things are in order, you can relax and focus again on running your business.