A Small Business’ Guide to Australian Tax Obligations

To ensure that your small business is tax compliant, you need to understand your tax obligations. Meeting all tax reporting requirements laid out by the Australian Taxation Office (ATO) is a crucial element in operating your business. Failing to fulfil your tax obligations could result in fines and other penalties being imposed on your business which can have a negative impact moving forward. 

Different tax obligations and entitlements are applicable depending on the type of work that your business does. For small businesses that employ staff, there are further tax obligations that you will need to ensure are met and the number of employees can further influence these obligations. How you structure your company, whether as a company, a sole trader, or trust is also important in regards to your responsibilities when tax time rolls around. 

Continue reading to learn how you can ensure that you manage your tax affairs efficiently and fulfil your obligations as an employer and a small business owner.

Goods And Services Tax

Depending on the turnover of your business or the number of sales of services, you may need to register for GST. Goods and services tax is a very broad tax that is applied to the vast majority of goods, services and other items that are sold by businesses in Australia. Once you are GST registered you can use an online tool for GST calculation in Australia so you can add GST to your prices correctly. 

Business Activity Statement (BAS) 

In order to report your report and pay your taxes to the ATO, you need to lodge a business activity statement. A BAS will allow you to report and pay GST, pay as you go (PAYG) instalments, PAYG withholding tax and other taxes related to your small business with ease. Your BAS can be submitted online through the ATO Business Portal, where you can also manage your other business taxes. 

Pay As You Go (PAYG)

Pay As You Go is a system in Australia, that allows business owners to pay their taxes in instalments in a fixed timeframe. If you are an employer, you need to help your payees fulfil their end-of-year tax responsibilities. The way for employers to do this is collecting PAYG withholding amounts from payments issued to employees, other workers that you have contracts with and businesses that fail to supply their Australian Business Number (ABN). Remember to register for PAYG in advance of your first payment subject to withholding.

Fringe Benefits Tax (FBT) 

You may be liable for Fringe Benefits Tax (FBT) if your business offers particular benefits to your employees, their families or other associates. This is a payment to an employee that is not a part of their salary or wages. For example, a company car, gym membership, tickets to concerts giving a discounted loan or reimbursing for an expense an employee has occurred. If you are liable for FBT, you must register with the ATO and submit lodge a return annually.

Payroll Tax

If you are a small business owner that employs a team, then you will need to pay payroll tax. Payroll tax is a general-purpose state and territory tax that is self-assessed. This tax is calculated on wages paid or payable to your employees. However, your payroll tax must exceed a threshold amount for you to be liable for payroll tax. Payroll threshold amount and tax rates are different in each state and territory so be sure to research what the regulations are in your area so you understand business’ obligations.

Make Sure that Your Small Business Is Tax Compliant

Having a good understanding of your tax obligations will ensure that your business is fully tax-compliant and that you avoid incurring penalties or fees. Knowing exactly what your tax obligations are will also allow you to better plan your business finances throughout the year and ensure that tax time is a stress-free, seamless experience for you and your team. 

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