Steps you need to take when making the move from permanent to contracting
So you have decided that you want to make the switch from permanent to contracting. Leaving the security of a full time permanent role can be quite a daunting move but very rewarding if done correctly. As you are taking upon more risk and liability, you normally are able to earn a significant amount more than your permanent roles. Not to mention the freedom where you can choose which projects to work on, when and where to work.
This guide will assist you in determining what you need to do when making the move.
Choosing the right structure
When: before you start
Finding the right structure for you is not an easy task and this is when you should get an expert opinion (whether it is from an accountant or experienced mentor). There are many ways a contractor can operate from:
- Sole trader
- Pty Ltd Company
- Contractor through Umbrella Company
There is no one structure that fits all situations and all industries. However, choosing the wrong structure from the start can be a costly exercise in the long term as it can affect your taxes, profits and risks.
We provide a 100% free initial consultation and can assist you in choosing the right structure that fits best.
Feel free to get more information on our website here: the differences between Sole trader and Company
Setting up your Australian Business Number
When: Ideally before you start
As a contractor who is running their own enterprise you must register for an Australian Business Number (ABN). The ABN is a unique number that allows you and to identify your business to government and other businesses. Box Advisory Services are registered tax agents and are able to assist you in applying for an ABN. Otherwise, you are able to apply for an ABN through the Australian Business Register.
Drafting up your contract
When: When you sign up your first client
In many serviced based industries such as construction, IT and business management contracts are required to outline the scope and terms. There is great deal of templates online you can use. Check out our guide regarding written contracts.
If your service is highly specialised and require certain terms and conditions, it is always a good idea to get some advice from an industry association, solicitor or business adviser.
Open a business bank account
When: A week or two before you send out your first invoice
You can ask your clients to pay your invoices to your own personal bank however this can get very confusing and difficult to manage over time. If you would like to contract in the long term, we advise that it is better to separate your personal bank account from your business. Also, the business bank account can reinforce your brand and professionalism in front of your clients. Businesses like to know that they are dealing with professional businesses and having a bank account under your business name can create this impression.
Setting up a bank account is relatively easy and very cheap. It could cost from anywhere between $0 to $10 per month. It can take up to a week to setup (depending on your bank). It also gives clients more flexibility for payment as most business bank accounts have extra bank facilities such as merchant facilities and Bpay. For further information check out our guide on setting up a bank account.
Setup compulsory insurances & industry specific licenses
When: Upon start
When moving from permanent to contracting there are compulsory insurances and industry specific licenses that are required before you can trade. If you are unaware of what to setup have a look at our guides which provided detailed information on insurances and licenses.
Check out our insurance guide for further information. Also have a read of the the 10 important obligations you need to consider while contracting.
Register for your tax obligations
When: Before you issue your first invoice
As you will be moving from permanent to contracting you will need to ensure your new business has setup all the right taxes. You have to legally display the taxes on your tax invoice so this must be done before your first tax invoice. See the tax guide for further information.
Find the right accountant to guide you
When: Preferably as soon as you
As you can tell there is a lot to consider when transitioning effectively from permanent to contracting, and a qualified accountant can help you along the way. Whether you are in the construction, IT, media, creative, medical, health or management consulting industry there are a lot of key decisions to be made even after the transition. Save yourself the headache and find the right accountant!
Box Advisory Services offers a fixed fee package which can include:
- Monthly Financial Statements
- Quarterly BAS Preparation and Lodgements
- Annual Company Tax Return
- Annual Income Tax Lodgements
- Personal Income Tax Lodgements
- Payroll Services
- Bookkeeping Assistance
- Expert Professional Advice to identify key areas of improvement
- Access to our client resource and portal
Have a look at our packages at Pricing.
Contact us now and have one of our trusty accountants get in touch with you within 24 hours