Everything You Need to Know About Australian Business Taxes

Friday, 1 Apr 2022

Paying taxes is a significant part of running a business in Melbourne and compliance with the state tax laws becomes mandatory for every entity. Recently, small business owners contributed more than $85 billion as income tax in Australia.

There are different types of taxes applicable to businesses, which makes understanding taxation vital for entrepreneurs. Usually, the responsibility is delegated to expert bookkeepers in Melbourne because it helps them calculate the amount correctly and avoid penalties.

However, the business owner needs to identify the tax obligations related to their business to lodge and pay the taxes without any errors. It also helps them determine the applicable tax deductions and save unnecessary expenditure. So, here is everything you need to know about Australian Business Taxes.

Business Tax Requirements

The tax obligations for businesses depend on the organisational structure, the number of employees in the staff and the type of business. The first step is registering the business for taxes on Business Registration Service for all the different taxes.

Your bookkeeper will help you understand which taxes apply to your business. All businesses must register for the Tax File Number (TFN). While sole traders are allowed to use their individual TFN, companies, trusts and partnerships need to register for a separate TFN for their businesses.

Registering for the Australian Business Number (ABN) is also necessary if you need to register for Goods and Services Tax (GST). All businesses operating as a company need to get the Australian Company Number (ACN) before registering for ABN. Here is a list of all the taxes that are applicable to different businesses operating in Melbourne.

Income Tax

Income tax is levied on the taxable income of the business that is determined by its assessable income (gross income earned through sales and other activities) without any deductions. The bookkeeper will help you to lodge the income tax return every year and if the annual turnover of the business is below $10 million, the owner can claim small business tax deductions to reduce the tax amount.   

Goods and Services Tax

Businesses that deal with buying and selling of goods and services need to register for GST if their GST turnover is $75,000 or above. The same is applicable to not-for-profit organisations that have a GST turnover of $150,000 or more.

It is also mandatory to register for GST if the business offers taxi or limousine travel or wishes to claim fuel tax credits. Your bookkeeper will help you understand this better.

PAYG Withholding and Payroll Tax

Entities that pay salaries and wages to their employees must register for Pay as you go (PAYG) withholding. It requires withholding a sum of money from what is meant to be paid to the employees, contractors, and businesses that do not provide their ABN. Besides PAYG Withholding, businesses must pay payroll tax in Melbourne if the wages paid are above the tax-free threshold.

Fringe Benefits Tax

FBT is applicable to those businesses in Melbourne that offer benefits and perks to their staff members, such as a car for personal use, products at a discounted price, loans at a lower interest rate, repayment for personal expenses, etc.  

Capital Gains Tax

The tax that the business pays on a capital gain or loss is CGT and it is included in the income tax return. It is usually incurred on the gain or loss from selling an asset and can be accurately calculated by a bookkeeper.

Land Tax

If the business owner operates on his own land or buys a property, he is liable to pay land tax applicable in Melbourne. It is applicable to businesses that have land in the state whose total taxable value is $300,000 or above.

The threshold for trusts is $25,000. Besides land tax, the business also needs to pay stamp duty and rates on buying and owning property in Melbourne.

 Fuel Tax Credits

A business can claim credits for fuel tax which is added to the fuel price that is used by the business. It can be claimed for the taxable fuel purchased by the business or imported for business purposes. These fuels include gaseous fuels, liquid fuels and fuel blends.

 Wine Equalisation Tax

The Wine Equalisation Tax is applicable to businesses in Melbourne that are involved in winemaking, importing and selling it by wholesale.

Luxury Car Tax

The LCT is levied on cars with a GST-inclusive value that exceeds the LCT threshold. It is applicable to businesses and individuals who are luxury car dealers.

Paying Taxes to the ATO

The bookkeeping department takes charge of submitting tax returns to the ATO in Melbourne. They also lodge the business activity statements and financial reports. The submissions must be made before the deadlines mentioned by the ATO to avoid penalties.

Thus, most bookkeepers prefer completing the task online, reducing time and effort. They should use AUSkey or Manage ABN Connections to ensure that the business’s sensitive information is not compromised while working online.

For the tax season, the bookkeepers need to maintain accurate records of all the transactions. It is essential to provide proof of business expenses while claiming tax deductions.

Conclusion

Small business owners need to be aware of their tax responsibilities to understand the correct amount that needs to be paid to the ATO. Also, they must hire proficient bookkeepers in Melbourne for the timely submission of the reports, statements and tax returns.

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