There are a range of taxes that impact on small businesses. It is important to make sure you understand which taxes and tax rules apply to your business and what you need to do to comply.
If your GST turnover is below $75,000, registering for GST is optional. This may have been the case when you started your business.
If you become aware that your GST turnover will exceed the $75,000 per year threshold, you will have to register for GST within 21 days. It's a good idea to check each month to ensure you're not likely to go over the over the limit.
You may choose to register if your GST turnover is below the $75,000 threshold, however this means that once registered, regardless of your turnover, you must include GST in your fees and claim GST credits for your business purchases.
To register for GST:
Business Activity Statement
If your business is registered for goods and services tax (GST), you are required to complete a business activity statement (BAS) on a monthly or quarterly basis.
The BAS is a tax requirement used for reporting obligations such as GST, pay as you go (PAYG) instalments and PAYG withholding tax. If you need help to work out GST amounts for your BAS, use the GST calculation worksheet.
The Australian Taxation Office (ATO) will automatically send you a BAS when it is time to lodge.
Pay As You Go withholding
Pay as you go (PAYG) withholding is a system that collects tax from the payments you make to employees and businesses so they can meet their tax liabilities.
You must be registered for PAYG withholding if:
- you have employees;
- you have other workers, such as contractors, and you enter into voluntary agreements to withhold amounts from your payments to them; or
- you make payments to businesses that don't quote their Australian business number (ABN).
If you pay withheld amounts, you must report the amounts on your business activity statement and lodge an annual report.
Good business records also help you to manage your business, meet your tax requirements and make good business decisions. It is a legal requirement to keep records that explain your business transactions. Records must be kept either electronically or on paper for at least five years.
Some records you need to keep for your business tax purposes include income, expenses, and bank records. If you have employees or contractors you will also need to keep tax file number declaration forms, records of wages and allowances, superannuation records, and contracts. Use the ATO Record Keeping Evaluation Tool to help you work out what records you need to keep for your business.
You can choose to keep your records manually or electronically. Manual systems include books or ledger accounts and are often available at your local newsagent or book store. Generally, manual systems will mean more time spent on paperwork. Electronic options include software, web and spreadsheets.
Capital Gains Tax
Capital Gains Tax (CGT) is the tax that you pay on any capital gain. It's not a separate tax, just part of your income tax.
The most common way of making a capital gain or loss is by selling assets, such as property or vehicles, which is a CGT event. If your home is a place of business, your business might have capital gains tax implications when you sell it.
There are four small business CGT concessions that can be used to reduce your capital gain on business assets. So long as you meet certain conditions, you can apply for as many concessions as you're entitled to until the capital gain is reduced to nil.
The Australian Taxation Office website has more information about Capital Gains Tax.
Fringe Benefits Tax
Fringe benefits are an important part of business and can be a useful way of attracting quality staff. If you're going to provide fringe benefits to your staff, you need to be aware of your tax obligations.
Fringe Benefits Tax (FBT) is a tax payable by employers for benefits paid to an employee (or an employee's associate e.g. a family member) in place of salary or wages. This is separate to income tax and is calculated on the taxable value of the fringe benefits provided.
It's entirely legal and a common form of reimbursement used by businesses for their employees to receive fringe benefits in the form of a car, car parking, low interest loans or payment or private expenses.
Find out more about fringe benefits tax and how to register on the Australian Taxation Office website.
Payroll Tax is a state tax on the wages paid by employers. It's calculated on the amount of wages you pay per month and collected in each state or territory that your staff are location in.
You are only liable for payroll tax if your total Australian wages exceed the exemption threshold that applies in your state or territory—exemption thresholds vary between states.
If your total Australian wage bill is under the maximum threshold for your state or territory, you're not liable to pay. Find out the monthly threshold by visiting the Revenue Office website in your state or territory.
Visit Payroll Tax Australia for more information, videos and webinars to help you understand the process of registering for payroll tax in your business.
Small businesses with an annual turnover less than $2 million may be able to access a range of tax concessions.
- Income tax concessions
- Capital gains tax concessions
- Goods and services concessions
- Pay as you go instalment concessions
- Fringe benefit tax concession
- Research and development tax concession
The ATO offers a range of services and resources to help small businesses understand and comply with their tax requirements:
- ATO phone services
- Business helpline: 13 28 66 (8am-8pm Mon-Fri; 10am-4pm Sat local time)
- Superannuation: 13 10 20 (8am-6pm Mon-Fri)
- AUSkey enquiries: 1300 287 539 (8am-6pm Mon-Fri)