So in Part 1 I explained why I wanted to answer the question of becoming a freelance journalist but also clarify exactly how difficult it can be to work as a freelance journalist.
In this part I am going to tell you what, in Australia at least, you need in order to become a freelance journalist and to set up a business.
And the first thing you need to know is that yes, you are starting a business. And that you can be all by yourself as a sole trader, work with a couple of others in a partnership arrangement or set up a company with yourself working in it and the option to hire others for various aspects of it.
ABNs, ACNs and taxes
A sole trader is the easiest in terms of taxes and set up. You just need an Australian Business Number or (ABN) which is free from the ATO. If you want to create a company you need an Australian Company Number (ACN) which does cost you and you need to register a business name as well. A partnership is somewhere in the middle.
If as a sole trader you go bust, you just register a loss and either shut up shop or attempt to keep going but you are liable if you owe anyone money and will have to pay it out of your personal income. Everything can be filed with your personal taxes. If you are in a partnership, the people in the partnership are equally liable and the cost of paying any debts is divided between them. If you have set up a company, you and any shareholders can wind the company down and make a settlement to pay off any debt but you have less liability and don’t need to dip into your personal income to pay the debt off. You will however have to report quarterly to the ATO about your income and your GST and so on.
Savings, wages, super and taxes
You will need to set aside a regular portion of your income for your savings, wages, super and your taxes. This is so that if you ever make above the threshold you will have sufficient money to pay your taxes when the time comes because you won’t be taking tax directly out of your wages before your clients pay you as you would when you would be working in-house somewhere.
You also need to set aside a regular part of your income for savings because this will help you do what you want to do or get you through the lean times.
Super is critical. This is your pension. You will need to set aside a certain part of your income to go into your superannuation account. You can self manage or go with an industry super fund like Media Super. They have nifty calculators you can use to work out how much you need to put into your super account each month.
You might be wondering why I mentioned wages. If you are working for yourself and it is just you by your lonesome then wages may not occur to you but I think it is very wise to have two bank accounts and have a regular transfer set up from one to the other that pays you a certain percentage of your freelancing income each week or fortnight as your wage. It gives you an incentive to go out and get more work. It ensures you have some regular cash flow if you get enough work to sustain it and it means you aren’t using up all your income but are able to save and add to super and pay tax.
So how much of your income will you need to divert to each of these?
You can go by percentages which may be easier when you get different amounts of income from different clients. So, as an example:
Savings = 5%
Super = 5%
Tax = 5%
Any other investments = 5%
Business expenses = 10%
Your personal income = 70% out of which:
– Any credit card/debt/HECS repayments = 10%
– Bills and rent = 50%
– Personal spending = 40%
Or you can calculate it in the way I did for freelance editing work a few years ago by working out your expenses and what level of income you need annually and working backwards. You will have to make sure that you come back to it and re work your numbers each year because your expenses and taxation rates change and you will have to account for all those things.
You will also need to figure out your rates and the MEAA puts out a rate card to give you an idea of what you can charge. And there is a rate survey on this website that tells you who pays what to help you along.
Invoicing and GST
Don’t charge GST till you make $75,000 AUD per year because you don’t need to as a sole trader. It makes your life easier because you won’t have to file quarterly BAS statements with the ATO.
If you do not charge GST, do not call your invoice a “Tax Invoice” because that’s a legal misnomer as you aren’t invoicing for any tax on it.
Always include your ABN on your invoice because if you don’t clients can legally withhold pay up to 40% on the grounds that they have no clue if you are above board with the ATO paying taxes and such things.
Always include payment terms such as whether you want half at the start and half at completion or whether your pay cycle is within ten/fourteen/thirty days and so on.
Make sure you list the ways people can pay you. Start with a bank account that people can direct deposit/bank transfer payment into and a PayPal account for anyone overseas or individual clients as well as a postal address that cheques can be sent to.
Contracts and legal rights
The MEAA (the Australian journalism union) also has contract templates for freelance journalists to use which are worth looking into. These are often used when you set up a contract with a smaller organisation or client rather than when you do so with a major publication but you can send your contract through to them and see if they will accept it. If you are a union member you can also get free contract advice.
Try to always retain the rights to your work so that the publication may have first publication rights but you can then re-work your stories and re-use your research to submit elsewhere. There will be some places where you may be willing to let the publication have the rights to the material you produce because it might be work you are only willing to do submit once and you have no interest in re-working it but whenever possible try to retain the rights.
Contracts will also stipulate how long you work, what the payment terms are, whether there are kill fees involved (try to get kill fees) and so on. Ask for a new contract after each twelve month period with a major client.
That’s it for Part 2, Part 3 tomorrow will focus on the tech side of things, on the equipment you need, websites and apps and all that sort of fun stuff.