Understanding your tax obligation for businesses in Australia
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Understanding your tax obligation for businesses in Australia
Quick
Getting started with business registrations 3
What you need to know about business income tax 4
reference Claiming business expenses 6
guide Brushing up on your GST knowledge 8
Ready to employ staff? 10
An introduction to Fringe Benefits Tax (FBT) 15
Doing your Business Activity Statement (BAS) 17
Record keeping and reporting 19
Lodging your tax return 20
Your compliance checklist 21
MYOB backs aussie business 22
The information provided within this document is of a general
nature and is intended to be a guide only, in accordance with
our Legal Disclaimer. For specific advice regarding your particular MYOB offers online accounting solutions to suit all types of business 24
circumstances, please consult your tax agent or the Australian
Taxation Office as appropriate.
myob.com.au
Let’s connect
Congratulations, As a new business owner, now’s a good time to find out about your tax
obligations. Or perhaps you just need a quick refresher. Here at MYOB, our goal
you’ve started is to make business life easier. We want you to worry less about that three letter
word – TAX. That’s why we put together this eBook. You’ll find heaps of valuable
your business. information as well as some great ideas you can act on straight away.
How can MYOB help you to be compliant with the tax office?
It’s time to learn We make accounting software for small businesses in Australia and New Zealand,
how to do your including some pretty nifty cloud-based ones, which you can learn about at the
end of this document.
business tax.
Okay, let’s get started.
1 Understanding tax for businesses in Australia myob.com.au
2 Understanding tax for businesses in Australia myob.com.au
Getting started with small
business registrations
Feeling overwhelmed about setting up your business for Business registration checklist
tax purposes? Well, you’ve probably done most of the hard Registration type Phone
work already.
Tax File Number (TFN) 13 28 61
By now, you may have decided on whether you’re to run your
business as a sole trader, a partnership or a company. Australian Business Number (ABN) 13 28 66
And you’ve probably already registered your business name
Goods and Services Tax (GST) 13 28 66
with the Australian Business Register and received your ABN.
Pay As You Go withholding (PAYG) 13 28 66
Simply registering a business name does not give you any
exclusive rights to that name. Only a trade mark can give you Fuel tax credits 13 28 66
that kind of protection. To ensure you have exclusive use of your
Fringe Benefits Tax (FBT) 13 28 66
business name you can apply for a trademark via an IP lawyer
or visit ipaustralia.gov.au.
3 Understanding tax for businesses in Australia myob.com.au
What you When you’re in business, you receive income for the goods and services you sell. You need
to pay tax on business income earned in the financial year (from July 1 to June 30).
need to know You can claim your business expenses against your business income to arrive at your net profit.
about business
As a sole trader, you use your Tax File Number (TFN) when you lodge your tax return and your
Australian Business Number (ABN) for all your business dealings.
income tax Sole traders pay tax at the same rate as personal income tax. If you are an Australian resident,
you don’t pay tax on the first $18,200 you earn. This is called the tax-free threshold.
Find out more about sole traders, partnerships and companies.
4 Understanding tax for businesses in Australia myob.com.au
For more information about tax rates, visit ato.gov.au
Alex’s Bricklaying Service has the following Below is a simple example:
income and deductions for the year: Taxable income Tax on this income
> Business income (assessable income) = $58,000 $0 – $18,200 Nil
> Investment income (assessable income) = $2,000
$18,201 – $37,000 19c for each $1 over $18,200
> Business deductions = $19,900
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
Alex includes these amounts in his financial year individual tax return.
He works out his taxable income to be: $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
Assessable income – allowable deductions = Taxable income $180,001 and over $54,547 plus 45c for each $1 over $180,000*
> $60,000 – $19,900 = $40,100
* The above rates do not include the the Medicare levy of 2%.
To work out the tax he has to pay, Alex applies the financial year’s tax rates
Rather than pay a large amount of tax at the end of the financial year,
to each relevant bracket of his taxable income, keeping in mind that tax
Alex can make voluntary tax payments during the first year
rates are subject to change every year.
of business. This will help to even out the cash flow.
5 Understanding tax for businesses in Australia myob.com.au
Claiming business expenses
There is no complete list of business expenses or allowable deductions
you can claim. However, you can use the following as a guide:
> Advertising > Electricity including other
> Bank fees, charges and home office expenses
tax agent fees > Hired or leased equipment
> Business travel including > Interest on borrowed money
transport and freight
> Motor vehicle expenses
> Depreciation of assets used
> Phone expenses.
in your business
6 Understanding tax for businesses in Australia myob.com.au
For more information about running your business
from home, visit ato.gov.au
Working from home
If you operate your business in full or in part from your home, Whether you can claim either running expenses or occupancy
you may be able to claim a deduction for: expenses depends on:
> Occupancy expenses such as rent, mortgage interest, > Your home is your principal place of business
rates, land taxes and house insurance premiums > Your home is not your place of business, but you
> Running expenses such as phone rental and business occasionally undertake some business activities from
calls, internet fees, depreciation of office furniture and home (e.g. invoicing of customers).
equipment, additional heating, cooling, lighting and
cleaning expenses
7 Understanding tax for businesses in Australia myob.com.au
Brushing up What is GST?
The Goods and Services Tax (GST) is a tax added to the price of goods and
on your GST services sold in Australia. It is collected by GST registered businesses at each
knowledge
step in the supply chain. At the moment, the GST is set at 10% of the price of
the product or service.
Do I have to register for GST?
You will need to register for GST if your turnover (gross income) is $75,000 or
more, or $150,000 or more if you are a non-profit organisation. GST registered
businesses collect GST on behalf of the Government by building it into the prices
of products and services, and then claim GST back from the ATO amounts spent
on business expenses.
8 Understanding tax for businesses in Australia myob.com.auWhat will
GST cost me?
Based on the difference between the
GST you collect on items sold and the
GST paid on expenses, will determine
the amount you pay or receive as a
refund from the ATO.
You do this by filing a monthly or
quarterly Business Activity Statement
(BAS) with the ATO throughout the
year – you can also do this yearly if
you choose. Your BAS will show that
you have to pay or receive a refund.
9 Understanding tax for businesses in Australia myob.com.auReady to
employ staff?
As your business grows you may need
to consider hiring employees. Putting on
staff is fairly straightforward, but if you’re
unfamiliar with payroll processes and
legislation, you may find yourself subject
to significant penalties.
10 Understanding tax for businesses in Australia myob.com.auOnline accounting software lets you
easily create payment summaries
Creating payment summaries
About PAYG withholding Creating payment summaries
When you employ staff, you may have to withhold tax To meet your end of the financial year PAYG withholding reporting
amounts from payments you make to employees and obligations you must:
other workers, and pay these amounts to the ATO. > Provide by no later than 14 July individual payment summaries to
This process is done through a Pay As You Go (PAYG) all your employees and other payees. These summaries show how
withholding system. As an employer, it’s best to register much you paid them and the amount of tax withheld.
for PAYG withholding before you make your first payment. > Complete your PAYG payment summary statement and submit to
You generally report and pay the withheld amounts to the ATO no later than 14 August. This statement summarises all the
the ATO when you lodge your activity statements. payments you have made to employees and other payees and the
total amount withheld.
11 Understanding tax for businesses in Australia myob.com.auMeeting Your own super
If you are a sole trader, you are responsible for your own superannuation arrangements.
superannuation You may be able to claim a deduction for any contributions you make to your own super.
obligations Super for your employees
If you have any eligible employees, you must pay a minimum of 9.50% of their gross salary
into a super fund of their choice. This is known as the Super Guarantee Charge.
MySuper is a special fund type which will become the norm by July 2022. From 1 Jan 2014,
unless an employee chooses a different fund, all employers must pay the Super Guarantee
Charge contributions (9.50%) to a MySuper fund. In 2017, if a fund is not deemed as a
MySuper compliant fund type, the monies must be rolled over into a MySuper fund.
12 Understanding tax for businesses in Australia myob.com.auAbout Super rates -
they’re going up Year range Super rate Year range Super rate
1 July 2012 9% 1 July 2022 10.5%
The government is incrementally increasing the 1 July 2013 9.25% 1 July 2023 11%
Superannuation Guarantee rate.
1 July 2014 9.5% 1 July 2024 11.5%
For the payroll year commencing 1 July 2014, the
1 July 2021 10% 1 July 2025 12%
minimum superannuation guarantee contribution
rate of 9.50% will need to be applied.
Superannuation payment dates
Quarter Payment date
Q1. 1 July – 30 September 28 October
Q2. 1 October – 31 December 28 January
Q3. 1 January – 31 March 28 April
Q4. 1 April – 30 June 28 July
13 Understanding tax for businesses in Australia myob.com.auSix point checklist for hiring staff
1 Register for PAYG withholding by 4 Register a MySuper fund as your 5 Acquire accounting software
visiting the ato.gov.au (you can also default fund and stay up to date and set up payroll.
do this when you register an ABN). with super changes. Your income
tax will need to be paid by 6 Reconcile your PAYG withholding
2 Register for WorkCover in your state. 7 February in the following year tax obligations for your monthly,
if you have a 31 March balance quarterly, or annual BAS
3 Investigate employee awards date (or, if you have an accountant, (depending which reporting
and entitlements by visiting by 7 April). frequency you have selected).
fairwork.gov.au
14 Understanding tax for businesses in Australia myob.com.auAn introduction to
fringe benefit tax
Providing benefits can be a great way to recognise and
reward your employees’ contribution to your business,
but you should remember that some benefits or perks are
subject to FBT. This is a tax that you the employer pays.
15 Understanding tax for businesses in Australia myob.com.auFBT applies to non-salary or wage benefits you give to your Some fringe benefits don’t need to be reported on payment
employees, such as use of a company car or a discount on summaries. The rules for working out the taxable value of
a product. These types of benefits are simply considered a fringe benefit vary according to the type of benefit.
‘cash in another form’, which is why they are separately taxed. For example:
Types of taxable Fringe Benefits include:
1 You pay a staff member $35,000 p/a and provide
> The private use of a car a car worth $10,000
> Low interest loans used for private purposes
> Payment of private expenses 2 The $35,000 is taxed at the applicable PAYG rate
which you withhold and pay to the ATO
> Certain types of entertainment e.g. meals where an
employee is not travelling overnight 3 The $10,000 car is taxed at the applicable FBT
> Other benefits if the cost is above certain thresholds. rate (46.5%) which you pay to the ATO.
For more information on Fringe Benefits, visit MYOB Blog.
16 Understanding tax for businesses in Australia myob.com.auDoing your Business
Activity Statement (BAS)
Small businesses who are registered for > GST
GST are required to submit activity >
PAYG income tax instalments (including
statements to report and pay a number the flood levy where applicable)
of tax obligations. A Business Activity
Statement (BAS) is a form issued by the > PAYG tax withheld
Australian Taxation Office that you can > Fringe benefits tax (FBT) instalment
submit on a monthly or quarterly basis. > Luxury car tax
It’s used to summarise the amounts of
GST payable and receivable by your > Wine equalisation tax
business in a certain time period. > Fuel tax credits
The BAS also allows you to report on a >
Instalment notices for GST and/or
range of other taxes, including: PAYG instalments.
17 Understanding tax for businesses in Australia myob.com.auHow to lodge your BAS
You can lodge your BAS online, through your accountant
Important BAS
or BAS agent or by mail. You can even lodge it over the lodgement and
payment dates
phone, but only if your BAS is ‘nil’, i.e. you have no activity to
report. If your business hasn’t traded and received income
or incurred expenses, you still have to complete the BAS
and lodge it with the ATO. If you report monthly:
the 21st day of every month for the period just gone.
Standard Business Reporting (SBR) If you report quarterly:
SBR is an ATO initiative to simplify business reporting Q1. 1 July – 30 September 28 October
to government. Australian businesses are able to
Q2. 1 October – 31 December 28 January
use SBR-enabled software to prepare and lodge their
government forms. Q3. 1 January – 31 March 28 April
Q4. 1 April – 30 June 28 July
18 Understanding tax for businesses in Australia myob.com.auAvoid the risk of being prosecuted or fined. Get your books
organised by using online accounting software
Record keeping As a business owner, you’re required by law to keep accurate tax records.
You also need to be able to calculate your income and expenses. If you don’t
and reporting have enough records to do this, then you’re not meeting your tax obligations
and could face penalties.
You must keep tax records for a minimum of five years, and these can include:
> Income and sales records > Expense or purchase records
> Bank records > Asset purchase records
> Contracts and agreements > Year-end records
> Minor deductable expenses > GST records
> Employee or contractor records > Motor vehicle records
> Fuel tax credit supporting records > Stocktake records.
19 Understanding tax for businesses in Australia myob.com.auLodging your tax return
As an individual will need to lodge your tax return, but as a
business, you will also need to lodge your business tax return.
Individual tax returns are due by 31 October each year, but if
you use a tax agent you may be able to lodge at a later date.
Be sure to check lodgement dates with your tax agent.
Remember, activity statements are different to tax returns.
Even if you report your PAYG instalments and other obligations
on an activity statement, you must still lodge a tax return.
20 Understanding tax for businesses in Australia myob.com.auYour compliance checklist
1 2 3 4 5
Decide on your Register your business Work out your Confirm what you Register for
business structure, name, ABN, GST, PAYG income tax and can claim as business SuperStream.
e.g. sole trader, Withholding, Fuel pay on time. expenses and
partnership, Tax Credits and FBT which assets you
company etc. if applicable. can depreciate.
6 7 8 9 10
Register for WorkCover Investigate employee Acquire accounting Reconcile your Keep your records
in your state. awards and entitlements software and set PAYG Withholding accurate and
at fairwork.gov.au up payroll Tax obligations for readily accessible.
BAS time, which will be
monthly, quarterly, or
annually depending on
the reporting frequency
you choose.
21 Understanding tax for businesses in Australia myob.com.auMYOB For the last two decades, MYOB has been developing systems
and applications that help small business stay compliant be
backs Aussie more productive.
business
We support business by:
> Working with the Government to make sure you’re aware of changes that
will affect your business
> Sponsoring the Telstra Australian Business Awards
> Providing great small business insights through the MYOB Blog – it’s packed
full of informative articles, helpful guides and the latest product details
> Publishing the MYOB Business Monitor, a national survey which includes
current perceptions and predictions of business owners
> Finding and showcasing great Australian businesses through the
Love Your Work initiative.
22 Understanding tax for businesses in Australia myob.com.auSit back and relax
knowing you’re in the
hands of experts
MYOB extended support
We’re here to help. You can reach our
support team on 1300 555 111.
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24 Understanding tax for businesses in Australia myob.com.auStay competitive Stay compliant
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25 Understanding tax for businesses in Australia myob.com.auEngage and connect with MYOB myob.com.au I 1300 555 111 ©2016 by MYOB Australia. All rights reserved. No portion of this book may be reproduced mechanically, electronically, or by any other means including photocopying, without written permission from the publisher. MYOB Australia. Level 3, 235 Springvale Road, Glen Waverley, Victoria, 3150 ASME142920-0116 myob.com.au
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