m+a Accounting & Consultancy

Business Tax In Australia and What to Expect

The Australian Taxation Office (ATO) is responsible for administering and collecting taxes in Australia, as well as in some state government revenue offices. If you’re a business owner, you can save money by paying the right amount in a timely manner and taking advantage of the tax concessions you are entitled to. 

The Australian Government sets the primary taxes that create a big impact on businesses. These taxes include capital gains tax (CGT), company income tax and goods and services tax (GST). When paying business tax in Australia, you can choose to pay either on a monthly, quarterly or annual basis.  

In this guide, you will know more about the general taxes and other business taxes in Australia

Capitan Gains Tax (CGT)

This is a type of tax that is applicable on any capital gain formed through asset disposition and paid as part of your income business tax. 

If you’re a foreigner carrying a business in Australia, you may be subject to CGT on assets used and acquired. It is compulsory for businesses to retain records when acquiring assets that are subject to CGT in the future. Under certain circumstances, small businesses are also subject to CGT concessions in the future. 

Company Income Tax

If you are an Australian resident who owns a company in the country, it is subject to company tax at a rate arranged by the Australian Government. As for a non-resident company, it is subject to business tax on its Australian source income, with a rate similar to a resident company. 

Both the tax rate and taxable income vary under certain circumstances, such as business structure or industry. 

Good and Services Tax (GST)

GST is a national, wide-ranged consumer tax on goods and services consumed or traded in Australia. Businesses that fall under this tax category are required to register for GST with the Australian Taxation Office. Moreover, you need to register your business with GST if:

  • Your business exceeds $75,000 GST turnover.
  • Your business provides ride-sourcing services or limo services.
  • Your non-profit organisation exceeds $150,000 GST turnover.
  • You plan to claim fuel tax credits for your business.

Payroll Tax

This is a type of state tax intended on the salaries you pay to your employees. To get the payroll tax, the amount of wages compensated per month is calculated. It will then be paid if the total Australian salaries surpass the exemption margin in the relevant territory or state. Moreover, the payroll tax rate and the payroll exemption margin vary between territories and states. 

Small Business Concessions

If you have a small business in Australia, you may be eligible for a range of concessions that include report and payment options. This is applicable to trusts, companies, partnerships and sole traders. In order to be eligible for these concessions, you will need to assess if your business falls under the ‘small business entity’ for the annual income. You also need to review your qualifications every year.  

Based on your aggregated turnover, you may still be eligible for certain small business concessions if you are not a ‘small business entity.’

Pay As You Go Withholding (PAYG)

You need to collect PAYG withholding amounts if you are an employer. This is a payment you make to the following: 

  • Your employees
  • Businesses that don’t cite their ABN (Australian Business Number)
  • Contractors that you have uncoerced agreements.

 

You will pay your income tax in instalments when your income and business income reach a certain amount. The payments are often done on a quarterly basis. If you want to avoid a large tax bill after you file your income tax return, the PAYG instalments can help. Take note that you still need to file an annual income tax return if you pay with PAYS instalments. 

Additional Pay Period in a Financial Year

Generally, a year has 52 weekly payments or 26 biweekly periods. However, there is an extra pay period in some years. This is why you may notice that there is not enough money being withheld at the end of the fiscal year. 

For your employees to avoid a possible debt, it’s best to give them the option of additional PAYG withholding amounts from their wages. 

Other Taxes for Businesses

There are other Australian state and territory government taxes that are pertinent to specific business activities. This may comprise items like fringe benefits tax and land tax. Make sure you review these business taxes to determine whether they are applicable in your case. 

How Does Tax Work for a Small

The amount you need to pay for the income tax of your business greatly depends on your taxable income. It is estimated from your assessable income minus deductions. Your tax accountant can handle this process for you. 

  • Assessable Income 

This is the income you earn from your business. This includes all gross income you earn from your daily business activities, together with the other income that is not included in your everyday business activities, such as capital gains. Also, it does not contain GST credits nor GST payable on sales you earn.

  • Deductions 

For all expenses involved in managing your business, deductions are amounts you can request. You need to file an income tax return first for the years you run your business. It’s necessary to lodge even if you’re not expecting to owe tax. You may also qualify for certain offsets, rebates and concessions. 

In order to qualify, the following must be met: 

  • Use the correct method when reconciling and calculating the quantity you claim.
  • Report all deductions and earnings to the government at the right time.
  • Maintain complete and correct records of your expenses and assessable income.
  • Pay all amounts owed on time.

How Malkoun & Associates Can Help You

Malkoun & Associates values clients and people. We are a team of professional tax accountants based in Australia, and we work with our clients to achieve their goals and success. We provide a wide range of business accounting and tax services, including tax consulting, audit and advisory and business valuations.

At Malkoun & Associates, we maintain the highest level of ethics and professional behaviour with consistent, honest and open communication with clients at all times. If you have any business tax-related concerns, contact us, and we will gladly assist you.