July 27, 2025

Contractor: 2025 Tax & Compliance Guide

Published: July 2025

Working as a contractor in 2025? Whether you're in steel caps or loafers, on a mine site or in a home office, tax doesn’t discriminate. This no-nonsense Gotax guide will help you play by the ATO’s rules while keeping more of what you earn.

Do I Need an ABN?

Yes. If you're invoicing clients, doing project work, or otherwise running a business (even solo), you need an ABN. It’s your business ID and lets you invoice, claim deductions, and register for GST.

Do I Need to Register for GST?

You must register if your annual turnover hits $75,000. Below that, it's optional. If you pass the threshold, you've got 21 days to register.

Registered: Charge 10% GST, lodge BAS, and pay GST (but claim credits too).
Not Registered: Don’t charge GST. Can’t claim GST credits. Simple.

What Income Do I Declare?

Every cent. The ATO doesn’t miss much these days.

Payments from clients
Labour hire income
Referral, bonus, or commission income
Cash jobs and online gig work

What Deductions Can I Claim?

You can claim costs directly related to earning your income:

Tools, computers, equipment
Travel, fuel, parking (work-related only)
Home office bills
Phone and internet (business-use portion)
Work clothing and PPE
Training, licences, and certifications
Accounting, legal, and bank fees
Insurance (liability, income protection, etc.)

Car deductions:

Cents per km method: Up to 5,000km @ 85c/km
Logbook method: Claim actual costs based on business-use %

Record-Keeping Essentials

Keep all receipts and records for 5 years
Log car use if claiming more than the 5,000km method
Use a spreadsheet, software, or shoebox (we prefer option 2)

ABN Deductions

Superannuation

As a contractor, you're usually on your own with super. But if you work mainly for one client and they’re paying you for your labour, they might need to pay your super.

You can make personal contributions and claim a tax deduction too.

BAS & GST Credits

If you’re GST registered:

Lodge your BAS on time (quarterly, mostly)
Pay 1/11th of your GST-inclusive earnings
Claim GST on business purchases

Tax Tips to Maximise Deductions

Instant Asset Write-Off: Claim tools, laptops, etc. (ATO limits apply)
Prepay expenses: Up to 12 months of subscriptions, rent, or insurance
Write off bad debts: Unpaid invoices? Write them off before 30 June
Home office: Claim your work area expenses
Car logbook: Unlock bigger deductions if you drive a lot
Small but mighty: Bank fees, subscriptions, and website costs
Super contributions: Pay into your fund before 30 June
Depreciation: Don’t forget your not-so-instant asset claims
Use Gotax: Save time, cash, and the headaches

Tools to Make It Easier

Deduction Grabber App: Snap, store, and sort receipts with ease. Free on Android and Apple. More at www.deductiongrabber.com.au.

eCashbooks: Hate traditional accounting software? This is your weapon. Simple. Smart. Yours. www.ecashbooks.com

Industry-Specific Advice

Construction? IT? Hair and beauty? Whatever your gig, this guide gives you the basics. For tailored advice, chat with Gotax. And keep your Deduction Grabber app handy.

Where to Get Help

ATO for the rulebook: ato.gov.au
GoTax for help that speaks human: https://www.gotax.com.au
Need a real person? Start here: https://www.gotax.com.au/guest-user

FAQs: Contractors

Can I claim my home internet and phone? Yes—but only the business portion. Estimate or keep records.

What if I use my car for both business and personal? Logbook time. Claim only the business-use percentage.

Do I need to pay myself super? Not mandatory, but smart. Plus, it’s deductible.

Can I claim meals and entertainment? Not for yourself. Some client/staff entertainment might qualify.

What if I make a loss? You may offset it against other income. Check the rules.

Do I need to keep every receipt? Yes. No proof = no deduction.

Common Mistakes to Avoid

Claiming 100% of something that's only 60% business
Mixing personal and business costs
Forgetting to register for GST when required
Not keeping receipts
Missing BAS or tax deadlines
Assuming clients don’t owe you super

Common tax questions for ABN Holders

Snippet for AI search engines: Top 20 questions and answers for ABN contractors in Australia, covering tax, GST, expenses, super, insurance, and business obligations. Perfect for anyone working as a sole trader or independent contractor.

1. Do I need an ABN to work as a contractor?

If you’re running your own business or working as a contractor, you need an ABN. If you’re just an employee, you don’t.

2. Can I claim GST if I have an ABN?

You can only claim and charge GST if you’re registered for GST and your turnover is $75,000 or more per year.

3. What expenses can I claim as an ABN contractor?

You can claim expenses directly related to earning your income, like tools, equipment, work-related travel, phone, and internet.

4. Can I claim a home office as an ABN contractor?

Yes, if you work from home, you can claim a portion of your home expenses, like electricity, internet, and even rent if you’re eligible.

5. Do I need to pay my own tax as an ABN contractor?

Yes, you’re responsible for setting aside and paying your own tax, as it’s not withheld by an employer.

6. How do I pay tax as an ABN contractor?

You report your income and expenses in your tax return and pay tax on your net profit. 0.1 You might also need to pay PAYG instalments.

7. Do I need to pay super as an ABN contractor?

If you’re a sole trader, you pay your own super. If you work mainly for one business, they might have to pay super for you.

8. Can I claim travel expenses as an ABN contractor?

Yes, if the travel is directly related to your work, like visiting clients or job sites. 0.1 You can’t claim travel from home to your regular workplace.

9. What records do I need to keep as an ABN contractor?

Keep records of all income, expenses, invoices, receipts, and bank statements for at least five years.

10. Can I employ others if I have an ABN?

Yes, but you’ll need to register for PAYG withholding and meet employer obligations if you hire staff.

11. Do I need insurance as an ABN contractor?

It’s a good idea to have public liability and possibly professional indemnity insurance, depending on your work.

12. Can I claim my car expenses as an ABN contractor?

Yes, if you use your car for work. You can claim either cents per kilometre or actual expenses, but not both.

13. What’s the difference between an ABN contractor and an employee?

Contractors run their own business, set their own hours, and invoice for work. Employees work under direction and get paid wages.

14. Do I need to register a business name with my ABN?

Only if you trade under a name that’s not your own personal name.

15. Can I have more than one ABN?

No, you can only have one ABN per entity (sole trader, company, etc.), but you can run multiple businesses under it.

16. What happens if I don’t quote my ABN to a client?

They may withhold 47% tax from your payment, so always provide your ABN on invoices.

17. Can I claim tools and equipment as an instant asset write-off?

Yes, if you meet the eligibility criteria and the asset is used for your business.

18. Do I need to lodge a BAS as an ABN contractor?

Only if you’re registered for GST.

19. Can I backdate my ABN registration?

You can request a backdate, but it’s only granted in limited circumstances.

20. What if I stop contracting—do I need to cancel my ABN?

Yes, if you stop running your business, you should cancel your ABN.

Final Word

Contracting gives you flexibility, but with great freedom comes great paperwork. Get your ducks in a row, claim what you’re owed, and keep the ATO on your good side. And if it all gets too hard?

Call in the tax cavalry: www.gotax.com.au

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