What You Need to Know About Small Business Tax
It is important for business owners to know about their tax obligations.
The Structure of your Business
You probably have already chosen the structure by which to operate your business, whether as a sole trader, a partnership, a trust or a company. You may have already applied for and received your ABN with the Australian Business Register. It is vital to set up your business correctly.
If you are an Australian resident for tax purposes, you’re not taxed on the initial $18,200 of your income. This is termed as the tax-free threshold.
Allowable deductions for businesses
The list of expenditures or allowable deductions that businesses can claim is comprehensive. Here are some of them:
- Advertising
- Bank fees, charges and tax agent fees
- Business travel including transport and freight
- Depreciation of assets used in your business
- Electricity including other home office expenses
- Hired or leased equipment
- Interest on borrowed money
- Motor vehicle expenses
- Phone expenses
- a logbook to calculate the business use percentage
- odometer readings for the start and end of the period you owned or leased the car, and
- written evidence for all car expenses, except for fuel and oil costs. Your logbook is valid for five years. You must have kept a logbook during the first year this method is used. The logbook must cover at least 12 continuous weeks
Applying for GST registration
A business with a turnover or gross income of $75,000 or higher, or a non-profit group with a gross income of $150,000 or higher, is required to register for GST. How do businesses collect GST for the government? It’s by including GST into the prices of their products or services. They then get their GST back from the ATO monies used on business expenditures.
Hiring employees
You may have to employ additional staff as your business expands. Hiring employees is quite clear-cut. However, if you are not familiar with payroll systems and laws, you may end up being penalised.
You may need to withhold taxes from monies you pay to your employees and other staff and disburse these sums to the tax agency. To perform this process, you use the Pay As You Go (PAYG) withholding system. It is recommended that employers register for PAYG withholding prior to making their first payment.
Making super contributions
The ATO is implementing a government initiative called SuperStream, which is designed to make the superannuation system more efficient. It is a new system for handling information and payments that employers have to follow when paying the superannuation contributions for their workers.
Business owners are now mandated to submit data and payments electronically in line with the SuperStream guidelines when making super payments on behalf of their workers.
If you employ 20 or more staff, you have to implement SuperStream contributions as soon as possible. If you have 19 or fewer workers, you have to implement SuperStream beginning 1 July 2015. For larger businesses, the ATO has given them a grace period of until 30 June 2016 to have a plan in place.
SuperStream offers many benefits. One of which is that you can make unlimited super payments fast and easy without leaving the online accounting software that you are using.
BAS submission
GST registered small businesses report and pay several tax duties by submitting activity statements. A form issued by the Australian Taxation Office, the Business Activity Statement (BAS), is submitted monthly or quarterly. Included in your BAS is a summary of the sums of GST that your business should pay and should recover in a specific period.
PJS Accountants can help you organise your tax, accounting and bookkeeping affairs. We work with large companies, SMEs, family businesses and individuals. For enquiries, contact PJS Accountants.
