Businesses are generally required to pay income tax on their profits. The rate of income tax can vary based on the structure of the business (e.g., sole trader, partnership, company) and eligible business deductions.
If your business has a GST turnover of $75,000 or more, you are required to register for GST. GST is a value-added tax of 10% on most goods and services transactions.
If your business has employees, you may need to withhold amounts from their wages to cover their income tax liability. This is known as PAYG withholding.
If you provide certain benefits to your employees or their associates, you may be liable to pay FBT. Examples of fringe benefits include company cars and low-interest loans.
If you provide certain benefits to your employees or their associates, you may be liable to pay FBT. Examples of fringe benefits include company cars and low-interest loans.
In some cases, businesses may be subject to stamp duty, which is a tax on certain transactions and documents.
It’s important for small business owners to stay informed about their tax obligations and seek professional advice if needed. Tax regulations can change, so it’s advisable to speak with an expert to fully understand the scope of taxes your business may be required to pay.
We envisage a future where every small business can get the right advice, at the right time, at the right price.
Company
A company lodges a business tax return and pays tax on company income.
Partnership
Each member of a partnership pays individual taxes on their share of partnership earnings. The partnership itself doesn’t pay business taxes, but you still need to lodge a business return under the partnership’s tax file number to declare the partnership’s income, deductible expenses and distribution of net income or loss between partners.
Non-Profit Organisations
Some non-profit organizations may be required to complete a BAS if they are registered for GST or have other tax obligations.
Trust
A trust must lodge an annual tax return; however, the tax payable is determined by how the trust’s income is distributed. If all trust income goes to adult resident beneficiaries, only these individuals pay tax, based on their trust earnings and other income declared in their personal tax returns.
Review your BAS
The ATO automatically sends BAS to any business that has registered for an Australian business number (ABN) and goods and services tax (GST). Most businesses lodge their BAS quarterly to report and pay their GST, pay as you go (PAYG) instalments, PAYG withholding and other taxes. Your BAS includes information you’ll need when you lodge your company tax return. Therefore, it’s important to review it for accuracy before filing. You can also correct BAS mistakes or make adjustments, as necessary.
Organise relevant business records
You may need several types of business records to lodge your taxes, such as:
Receipt for purchases
Paperwork for any sales that trigger capital gains tax
Records for passive income Statements for any interest you’ve earned Employee payroll records Statements for any stock shares or trust disbursements
The ATO currently requires businesses to keep records for 5 years (in most cases) from the date you lodge your tax return. Therefore, it’s extremely important to have a robust record keeping system in place.
Claim your eligible tax deductions
A tax deduction is an eligible business expense you can claim to lower your taxable income and reduce the amount of tax you pay each financial year. If you’ve been keeping good records, you’ll have the tax receipts you need to claim deductions on your small business tax return.
Report employee tax and super contributions
For many businesses with employees, using payroll software to automatically calculate and report on payroll taxes, PAYG withholding and super contributions makes regulatory compliance and tax time so much more straightforward.
Report employee tax and super contributions
Determine your tax lodgement date and file well in advance of the deadline. If you’re unable to finish your taxes on time, you may be able to request a deferral. But deferring your lodgement date doesn’t defer your payment date — you’ll need a registered agent to help you if you can’t pay your taxes. If a tax agent requests a payment deferral on your behalf and the ATO approves that request, payment will be due on your deferred lodgement date.
We envisage a future where every small business can get the right advice, at the right time, at the right price.
Businesses may be eligible to claim tax deductions for expenses incurred in the course of their operations. These deductions are applicable to most expenses directly linked to generating assessable income.
Business owners can consider claiming deductions for various types of expenses, including day-to-day operating costs, purchases of products or services for business use, and specific capital expenses such as depreciating assets like machinery and equipment.
The eligibility and timing of deductions depend on the nature of the expense. For instance, certain capital expenditures may be deductible over time, and deductions may need adjustment for any private or domestic use. Notably, fines are generally not deductible.
Three fundamental rules govern the acceptance of a business deduction:
Resources and items of value owned by the company, such as cash, accounts receivable, inventory, property, and equipment.
Debts and obligations owed by the company, including loans, accounts payable, and accrued expenses.
The residual interest in the assets of the company after deducting liabilities. It includes owner’s equity, retained earnings, and other components.
Business tax refers to the various taxes that businesses are required to pay on their income, assets, or activities. This can include income tax, Goods and Services Tax (GST), Payroll Tax, and other state and federal taxes depending on the nature of the business.
Common taxes for businesses in Australia include company tax (on profits), GST (on goods and services), PAYG withholding (for employee wages), and payroll tax (for businesses with high wage bills). Some businesses may also be liable for capital gains tax or other state-based taxes.
Businesses can minimise tax liability through effective tax planning, such as claiming all eligible deductions, making use of tax offsets, managing cash flow to maximise tax benefits, and ensuring compliance with all tax laws to avoid penalties.
The company tax rate in Australia is currently 30% for larger businesses. For small and medium-sized enterprises (SMEs) with an aggregated turnover of less than $50 million, the rate is reduced to 25%.
Tax deductions reduce the taxable income of a business, lowering the amount of tax payable. Common deductions include operating expenses, employee wages, business travel, and the depreciation of assets. Accurate record-keeping is essential to claim these deductions.
*Retinue’s payroll service includes the processing of hours and wages rates provided by you. We do not determine award rates for your employees or provide advice on the correct employment status of your employees. It is your responsibility to ensure that your employees are paid correctly and we recommend obtaining advice from specialised employment relations experts.
*Retinue’s (ABN 66 658 618 449) payroll service includes the processing of hours and wages rates provided by you. We do not determine award rates for your employees or provide advice on the correct employment status of your employees. It is your responsibility to ensure that your employees are paid correctly and we recommend obtaining advice from specialised employment relations experts.
Protection is only provided for ATO investigations notified to us during the period which you are a client and relating to any tax returns or lodgements prepared by us. Fines includes any penalties and interest that may result from any errors made by us but does not include any additional tax liability that may result from an amended lodgement.
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