Nobody withholds your tax anymore

The miracle has a catch

When you were employed, tax happened to you. An employer withheld it before you ever saw it, and the return each July was mostly a formality. The ABN ends that arrangement quietly and completely: nobody withholds anything now, but the income tax is still real, still accruing with every invoice, and still due after you lodge.

That's the whole trap of the first year. Nothing feels wrong until the first tax bill arrives, and by then the money has a way of having been spent.

The three things that actually change

First, income tax becomes your job. You still get the tax-free threshold ($18,200), and above it your business profit is taxed like any other income, just with nobody collecting as you go.

Second, after your first return with business income above the entry threshold, the ATO typically enters you into PAYG instalments: quarterly prepayments so the bill never balloons like that again. You'll get a letter. It's help, not punishment.

Third, GST stays off your plate entirely until your turnover reaches $75,000, current or projected, at which point you have 21 days to register. Until then, no GST on your invoices and no BAS to lodge.

Jess asks on day one

Jess left her marketing job in August and invoiced $4,400 in her first month. Her question isn't sophisticated, and that's the point: I just went freelance, what do I need to do for tax?

Her agent, reading her saved profile, walks the year ahead: the return she'll lodge, the instalments that will likely follow it, the GST threshold she doesn't need to think about yet at her pace, and the deductions that start counting from day one (the laptop, the software, the co-working desk). Each line lands with the ATO page behind it, so the answer to "says who?" is always one click.

Jess is made up. The thresholds, the instalment system and the 21 days are real.

Start the habit before the bill

The single kindest thing you can do for future-you is open a second account and move a slice of every invoice into it from the start. How big a slice depends on your bracket and your circumstances, which is exactly the kind of question to put to your agent with the current rates in front of it, or to a registered tax agent if the stakes are real. The habit matters more than the precision. July-you will want to buy August-you a drink.