BUSINESS INFORMATION
Tax requirements
All businesses are required to adhere to the tax registration and compliance standards established by the Australian Taxation Office (ATO). The specific tax obligations and registrations will vary depending on the nature and structure of your business.
Registering for tax
To ensure full compliance with regulatory requirements, it is essential to identify which registrations are relevant to your business operations.
The most frequently required registrations for small businesses include:
A TFN is a unique nine-digit identifier issued by the ATO. Every business entity must have a TFN.
– If you are running your business as a sole trader, you can use your personal TFN for both business and individual transactions with the ATO.
– If your business operates as a partnership, company, or trust, a separate TFN will be required for the entity.
You can apply for a business TFN during the process of registering for an Australian Business Number (ABN).
The ATO has more information about registering a TFN.
An ABN is a distinctive 11-digit identifier that simplifies interactions between businesses and government entities.
You will require an ABN to:
- Operate within the GST framework, including claiming GST credits.
- Verify your business identity when placing orders or issuing invoices.
- Prevent PAYG (pay as you go) tax deductions from payments you receive.
- Establish a myGovID and a Relationship Authorisation Manager (RAM) account for online transactions with government agencies.
Failure to register for an ABN may result in other businesses withholding tax at the maximum rate of 47% from payments made to you. Similarly, if a supplier fails to provide their ABN, you must withhold 47% of their payment unless they submit a statement by a supplier form.
If you intend to operate your business through a company, you must first register it with the Australian Securities and Investments Commission (ASIC) and obtain an Australian Company Number (ACN) before applying for an ABN and tax registrations.
While some organizations offer ABN registration services for a fee, applying through the Business Registration Service is free. Most online applications are processed instantly, though identity verification in certain cases may cause delays.
GST is a 10% tax applied to most goods, services, and items sold or consumed in Australia.
You must register for GST if your business:
- Has a current or projected annual turnover of $75,000 or more.
- Provides taxi travel services.
- Aims to claim fuel tax credits.
If not registered for GST, you must monitor your turnover monthly to determine if you’ve reached the threshold. Exceeding the threshold requires registration within 21 days.
You can register for GST during your initial business registration or at a later stage. Registering early, even if your turnover hasn’t reached the threshold, offers several benefits:
- Claiming GST credits for GST paid on business-related goods and services.
- Avoiding potential client dissatisfaction by incorporating GST into pricing upfront, ensuring net profit margins are maintained.
- Eliminating the need for monthly turnover monitoring to assess threshold compliance.
The ATO has more information about registering for GST.
When paying employees or contractors, you may be required to withhold tax from their payments and remit it to the Australian Taxation Office (ATO). The Pay As You Go (PAYG) withholding system helps both employees and businesses meet their tax obligations at the end of the financial year.
This applies to payments made to:
- Employees, company directors, and office holders
- Businesses that fail to provide their Australian Business Number (ABN)
- Individuals engaged under labour hire arrangements
- Contractors with a voluntary withholding agreement in place
- Employees upon termination of their employment
If you run your business as a sole trader or partnership and withdraw funds from the business, these withdrawals are not considered wages, and no tax withholding is required. However, you should plan for your income tax liability through PAYG installments or by setting aside funds in a separate savings account.
You can register for PAYG withholding when applying for an ABN or at a later stage. It is essential to complete your PAYG registration before withholding any amounts from payments. For further details, refer to the ATO’s resources on registering for PAYG withholding.
Action to take
Register for myGovID and the Relationship Authorisation Manager (RAM) to access the ATO’s Online services for business portal. These systems enable you to lodge business activity statements, check your tax account balance, update registration details, and manage GST and PAYG withholding registrations. The ATO provides additional guidance on using myGovID and RAM.
Other Tax Obligations
Businesses may also have additional tax responsibilities, including:
Administered by the Department of Finance, payroll tax is a general-purpose tax levied on wages paid by employers in Western Australia. For most small businesses, a rate of 5.5% applies when annual wages exceed 1,000,000(or 1,000,000(or 92,000 per month)
The Department of Finance has more information on payroll tax.
Employers are required to pay FBT on certain benefits provided to employees, their families, or associates. These benefits may be in addition to or part of their salary package.
Types of fringe benefits can include:
- Allowing personal use of a work vehicle
- Providing low-interest loans
- Covering private health insurance costs
- Offering entertainment such as meals, drinks, or recreational activities
CGT applies to the difference between the sale price of an asset and its original cost. Not all assets are subject to CGT, and any capital gain must be declared in your annual tax return.
Small business owners often incur capital gains or losses when selling business assets, such as premises or goodwill. Eligible small businesses may qualify for various CGT concessions.
Land tax is an annual tax imposed by the State Government on land owned as of 30 June each year, provided its taxable value exceeds $300,000. The Department of Finance offers more details on land tax and how it is assessed.
This State Government tax applies to dutiable transactions, including:
- Transfers of business assets
- Partnership interests
The Department of Finance has additional information on transfer duty.
PAYG installments are periodic payments made to the ATO to cover your anticipated income tax liability for the year.
Depending on your business activities, you may also be liable for other taxes:
More information
- Find out more about GST and PAYG withholding
- Do the free short courses in their online learning platform essentials to strengthen your small business
- Watch their Tax basics for small business videos
- Learn more about their in-house facilitation service for businesses with a tax or super dispute
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