Taxation

The taxes that apply to businesses depend both on their structure, their income and their business activities. Businesses typically rely on the advice and services of both bookkeepers and accountants Read more

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Taxation

The taxes that apply to businesses depend both on their structure, their income and their business activities. Businesses typically rely on the advice and services of both bookkeepers and accountants to ensure that they are meeting their taxation and reporting obligations. In large or complicated organisations, the demands can be time consuming and may require full time staff to manage effectively.

 

What is the tax-free threshold?

For sole traders, the tax-free threshold was $18,200 in the 2015-16 income year. It changes from time to time so businesses need to habitually check the individual income rates . There was no tax-free threshold for companies in the 2015-16 income year.

What are the tax rates for income?

Sole traders pay tax at the individual income rate which scales based on the amount earned, with no tax paid on income under $18,200. The company tax rate for small businesses with an aggregate turnover of less than $2 million is 28.5%, and thereafter it is 30%.

What small business concessions are available?

For sole traders:

  • Discount on Capital Gains Tax (CGT)
  • Income tax concessions
  • GST and excise concessions
  • Pay As You Go (PAYG) instalment concessions
  • Fringe benefits tax (FBT) concession

For companies:

  • Income tax concessions
  • GST and excise concessions
  • Pay As You Go (PAYG) instalment concessions
  • Fringe benefits tax (FBT) concession

What type of tax returns need to be lodged?

Individual tax return needs to be lodged each year. Business income and expenses go in your individual tax return using a separate business schedule – you do not need to lodge a separate return for your business. If you are operating a company, separate company tax returns needs to be lodged but you must also lodge your own personal return as an individual for income you earn via wages, shares, dividends or loans received from the company.

If you are a director of a company or trust, benefits you receive may be subject to FBT. You must lodge an FBT return if you have a liability during an FBT year (1 April to 31 March). You must also lodge return of any associated company trusts .

What business taxes and superannuation will I need to pay and report?

Business taxes and superannuation are not based on your business structure, but the activities of the business.

You may need to register for taxes such as:

  • Goods and services tax (GST)
  • Pay As You Go (PAYG) instalments

If you have employees you will also need to:

  • Make Pay As You Go (PAYG) withholding payments
  • Make Super Guarantee (SG) contributions

Consider if you need to pay fringe benefits tax (FBT) instalments. This is only required if employees receive a fringe benefit.  Check out the Australian Taxation Office’s (ATO) website for more on the types of payments that incur FBT .

When do I have to pay Goods and Services Tax (GST)?

For both a company and a sole trader, you must register for GST  if your turnover is $75,000 or more.

If it is below this amount it is optional to register.

When do I have to pay payroll tax?

Payroll tax is regulated by the state governments and therefore each state is different. To find out what applies in your state, follow this link: https://www.payrolltax.gov.au/harmonisation/payroll-tax-rates-and-thresholds