Income Tax for Small Businesses in Australia
Starting a small business can be an exciting and rewarding venture, but it’s essential to be aware of the various tax obligations that come with it. In this blog, we will provide you with an overview of income tax for small businesses.
Business Structure
The first step in understanding your income tax obligations is to determine your business structure. There are several business structures available, including sole trader, partnership, company, and trust. The business structure you choose will determine the tax implications for your business.
Company Tax Rate
If your small business is structured as a company and meets the Base Rate Entity criteria, the current company tax rate is 25% for companies with an annual turnover of less than $50 million. For non-base rate entity companies with an annual turnover of $50 million or more, the company tax rate is 30%.
Taxable Income
The taxable income of a small business is calculated by subtracting allowable tax deductions from the total income earned. Allowable tax deductions may include expenses such as rent, salaries, advertising, and insurance.
Tax Deductibles
Small businesses can claim a number of expenses as tax deductible, including:
- Business-related travel expenses
- Depreciation of business assets
- Business-related education and training expenses
It is important to keep accurate records of all business expenses, as these may be subject to review by the Australian Taxation Office (ATO).
Goods and Services Tax (GST)
Small businesses with a turnover of $75,000 or more are required to register for the Goods and Services Tax (GST) and collect this tax from their customers. The GST collected must then be remitted to the ATO.
Pay As You Go (PAYG) Withholding
Small businesses may also be required to withhold tax from payments made to employees, such as salaries and wages. This tax is known as Pay As You Go (PAYG) withholding and must be remitted to the ATO on a regular basis.
Final Thoughts
Income tax for small businesses can be complex, with various obligations and requirements. If you are unsure about your tax obligations, it is recommended that you seek the advice of a tax professional to ensure compliance with the ATO. By understanding your tax obligations and keeping accurate records, you can ensure the financial success of your small business.
For more information about Income Tax for small businesses call us on 07-3286 2407 and we will be happy to assist.