running a side hustle? here's what you need to know about money
While Instagram may make you believe that running a side hustle is all extra cash, creative freedom and choosing your own hours, what isn’t spoken about as much is the nitty gritty parts of freelance finances.
A little while back, we called in the clever duo behind accounting biz Bramble & Briar to host a webinar (in partnership Xero) for side hustlers who want to get their finances in order. Hint: that should be all of you!
If you didn’t manage to catch it then don’t stress – we’ve pulled out the top tips for you to crush that bookkeeping this EOFY. Whether you’re running a business from your bedroom or selling your wares at a weekend market, this one’s for you.
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RESEARCH If you’re looking to launch a brand-new biz then preparation is key. The first question you have to ask yourself: is this a hobby or a business? Will you make money from the business? Do you have long-term plans for it? Is it more than making ceramics for your friend’s birthdays? If you answered yes to any of the above then hooray! You’re launching a bonafide business. This means you’ll need to:
- Register your business name with ASIC, the Australian Securities and Investments Commission (and check that no one else already has the same).
- Get your own ABN (Australian Business Number). This number essentially helps the government keep track of you and your side hustle’s earnings.
- Figure out what industry you’re in so you know which code your biz falls under. This helps with situations like COVID when some industries shut down while others stay open. It’s another way for the government to ensure you get the assistance you need.
KNOW YOUR ACRONYMS According to Bramble & Briar, the Australian government loves an acronym party. Let’s break a few down.
GST: Goods and Services Tax.
This is a sales tax that you collect on the government’s behalf. When your side hustle begins to earn you over $75K per financial year (cha-ching!) you have to pay GST (and start including that in the price of your products or services). You can pay this annually or quarterly, depending on your preference. Top tip: if your business needs imported goods, you have to pay GST on them. Customs will send an invoice directly to you for this GST.
BAS: Business Activity Statement.
All Australian businesses registered for GST must submit a BAS to the Australian Tax Office. You can lodge your BAS monthly, quarterly or annually – it’s basically a form that summarises all of the business taxes you have (or will) pay to the government. You can either use the myGov portal and lodge online or get a registered tax agent to help you out.
DON’T MIX MONEY While having a side hustle might blur the lines between your personal life and business life, it’s best not to mix up your money. Make sure your personal and business income and outgoings are separate. This is the easiest way to see if you’re making money. It also simplifies your accounting and ensures that your side hustle isn’t eating into income from your day job.
Simply contact your preferred bank, tell them you need a business account and provide your personal TFN (tax file number) and ABN. Once you’ve accrued your GST for the fortnight, transfer it across so you’re not tempted to spend it. If you aren’t registered for GST, it’s still a good idea to regularly set aside money for when tax time rolls around. Discipline is crucial!
KEEP TRACK Speaking of discipline, Bramble & Briar note that bookkeeping isn’t something side hustlers should be afraid of. By getting comfy with bookkeeping, you can gain insight into your business. When you first start out, bookkeeping is as simple as getting those separate bank accounts sorted, but can also include getting an accounting software like Xero. This tracks your incomings and outgoings, bank statements and more.
You can also get assistance from a bookkeeper or accountant to help support you. While software and accountants come with a cost, investing in yourself is the most empowering way to build your business.
WATCH OUT FOR THE RED TAPE There are lots of little (and frankly unsexy) parts to running a side hustle. Some of these include:
- Checking with the relevant professional body, local council etc. to see if you need any specific licences or registrations to operate. For example, if you’re a ceramicist, can you have your own kiln at home?
- If you offer stock on consignment, you need a Personal Property Security Registration (PPSR) over that stock to ensure you can get it back if there are any issues.
- Even if they only work a couple of hours a week, you must have Workcover Insurance if you hire an employee.
- When you run the business from your sofa, check with your home building and contents insurance that you are covered to work from home, and that your contents insurance covers your business assets kept there.
Although they may sound boring, checking all of these things can save you pain down the line.
FINALLY, CELEBRATE THE WINS Many side hustles grow into huge businesses which is great, but if you enjoy keeping your small biz for your creativity or for a little holiday fund then that’s also rad. Figure out what works for you and remember why you started. By investing in your finances and your successes, you can celebrate the wins both big and small. Now, go forth and own that side hustle.
To get the full low-down on Bramble & Briar’s guide to finance, watch the webinar below.
For more small-business stories, head to Strictly Business.