As a small business owner in Australia, it is essential to understand the tax laws that apply to your business. This includes knowing how to lodge your tax return, what records you need to keep, and what expenses you can claim.With bookkeeping services, you can keep track of your finances and ensure that you meet your tax obligations. This can save you time, money, and stress in the long run.
Below is a detailed explanation of everything you need to know about tax for all small Australian businesses:
1. The Different Types Of Taxes That May Apply To Your Business
Four main types of taxes may apply to your small business in Australia:
1.1) Income Tax
Income tax is levied on the taxable income of individuals and businesses. The income tax rate varies depending on the amount of taxable income earned.
1.2) Capital Gains Tax
Capital gains tax (CGT) is a tax on the profit you make when you sell an asset for more than what you paid. The rate of CGT varies depending on the type of asset sold and how long you have owned it.
1.3) Goods and Services Tax (GST)
GST is a 10% tax levied on most goods and services in Australia. GST is generally included in the price of goods and services, and businesses are required to remit the GST they collect to the ATO.
1.4) Pay As You Go (PAYG) Tax
PAYG tax is a system where businesses withhold tax from employees’ wages and pay it to the ATO on their behalf. This ensures that employees pay their correct tax amount throughout the year. As a small business owner, it is vital to understand which taxes apply to your business and how to comply with your obligations.
2. How To Lodge Your Tax Return
All businesses in Australia are required to lodge a tax return each year. This is done by completing a Business Activity Statement (BAS).
The BAS is used to report GST collected, income earned, and any other taxes that may be payable. Lodging your BAS online is the easiest way to do this. You must have your Australian Business Number (ABN) and a myGov account linked to the ATO to lodge your BAS online.
Once you have lodged your BAS, you must pay any owing tax. This can be done via BPAY or direct debit from your bank account. You will still need to lodge a tax return if you are not registered for GST. However, you will not need to pay GST.
3. What Records Do You Need To Keep
As a small business owner, you must keep records of your income and expenses. This includes receipts, invoices, bank statements, and other documentation supporting your claims. You should keep these records for at least five years, as the ATO may request to see them at any time.
Tax can be a complex and daunting topic for small business owners. However, it is crucial to understand your obligations to avoid penalties or interest charges. If you are unsure of anything, we recommend seeking professional advice from a qualified accountant or tax agent.