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At the end of each financial year, you will need to lodge a business tax return to the Australian Taxation Office (ATO) to show how much income your business received and how much tax you paid. This applies even if you record a loss or haven’t met the tax threshold.
Once you’ve filed your tax return, you’ll be sent a notice of assessment and a tax refund if you’re entitled to one.
There are four commonly used business structures in Australia, and it’s important to understand the responsibilities of each one as it may affect the tax you’re liable to pay. The best one for you will depend on the size and type of your business and how you plan to run it.
When you register a business you will need to get an Australian Business Number (ABN) and a tax file number (TFN), and you’ll also usually need to register your business name.
Once you’ve taken these steps, you’ll then be registered for tax – although you may also need to register for goods and services tax (GST), pay as you go withholding (PAG) and fringe benefits tax (FBT).
The cost of your business tax return will depend on the size and complexity of your business, but on average you can expect it to be between $3,000 and $5,000.
You will need to send your business tax return to the ATO. You can do this online or by mail.
If you use your credit card to pay your business taxes, any fees charged on the card can be claimed back as a tax deduction. In some cases, you may also be able to claim your credit card annual fee as a tax deduction, but you’ll need to check with your accountant or the ATO.
For small businesses with an annual turnover of less than $10 million, the current tax rate is 27.5%.
If your company has an annual turnover of more than $10 million, you’ll pay the full business tax rate of 30%.
Scholarships will only be tax deductible if they are business related and if your self-education is in the relevant field of expertise.
Yes, you can complete your own tax return, but keep in mind it’s a time-consuming process and, as a small business, that time could be better spent elsewhere. It can therefore pay to use a registered tax agent or accountant to prepare and lodge your tax return for you.
Yes, Capital Gains Tax (CGT) applies on any capital gain made through the disposal of assets and is paid as part of income tax.
Most business expenses, such as electricity costs, phone, internet and home office costs, will be fully tax deductible, providing they are directly related to earning your assessable income. If any expenses are for a mix of business and private use, you can only claim the portion used for your business. You will also need to keep accurate records.
Taxes can have a big impact on your business, particularly when it comes to investment decisions and CGT. It’s therefore important to make sure you fully understand what taxes your business will have to pay.
The law generally requires that tax records be kept for five years after tax returns are lodged. However, if records relate to a company, the Australian Securities & Investments Commission (ASIC) requires them to be kept for seven years.
Gym memberships will only be tax deductible if you’re a gym owner or employee.
You can file your business tax return in a number of ways, including:
The tax-free threshold for small businesses is $18,200 in the current financial year.
There are several ways to find out your TFN. It will usually be in the top right-hand corner of your income tax notice of assessment from the ATO, but you’ll also be able to find it on documents such as payslips and superannuation statements.
Alternatively, if you have a myGov account and have connected your account with the ATO, you can locate your TFN online, or you can simply ring the ATO or speak to your accountant.
Yes – if you’re a sole trader, it’s quick and easy to file your tax return via myTax on the ATO website. To do this, you’ll need to set up a myGov account and link it to ATO online services.
Tax returns cover the financial year from 1 July to 30 June, but the due date for filing your tax return will depend on your business structure.
Sole traders, partnerships and trusts must lodge their tax return by 31 October – unless you lodge through a registered tax agent. Companies generally have up until 28 February to lodge their tax return, but if you lodge through a registered tax agent they will tell you when you can file.
Depending on the size and complexity of your business, accountants will typically charge between $3,000 and $5,000.