Understanding Taxes For Australian Small Businesses
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Be sure to consult with an accountant for any tax related information.
What’s one common thing that business owners struggle with? Taxes. Navigating which taxes your business is subject to, what returns to file, and how much you owe is a complex subject, especially with tax laws changing every year.
There are three common taxes that your business may be assessed: goods and services tax, payroll tax, and income tax. Each of these taxes is computed based on certain criteria, making it essential to understand the basics.
Goods And Services Tax
The first tax your business needs to comprehend is the goods and service tax. This is a tax imposed on the sale of goods and services to third parties or customers. The tax rate hovers around 10%. Some items you sell are exempt from GST including:
- Basic food items
- Childcare services
- Religious services
- Water, sewerage, and drainage
- Precious metals
This isn’t an all-encompassing list, making it important to do your due diligence on the Australian Government’s website. There are GST credits that can offset your tax liability on purchases that already include GST. This credit can be claimed when you file your GST return.
The next category of tax that your business may be subject to is payroll tax. This type of tax is enforced whenever you pay employees, including yourself. The current tax rate is 4.75% for employers. This amount is assessed on the gross wage amount and is required to be remitted timely to the Australian Government. However, keep in mind that payroll tax is a qualifying business deduction, helping you reduce your taxable income.
The most common tax that small business owners face is income tax. This tax type is assessed on the annual tax return, whether that be an individual or corporate return. You must report and pay tax on all business profits each year. This tax rate can range anywhere from 0% to 37%, depending on the other items on your return.
Small business owners that report all income on the individual return often neglect to properly plan for income tax. As a result, they are hit with a large tax bill that they can’t fully afford to pay. Planning for tax time throughout the year can help mitigate this burden. For example, put away 30% of all profit each month or make quarterly payments to the Australian Government.
Analysing the different taxes you are subject to as a business owner is essential to maintain compliance with the Australian Government. Equally as important is your insurance coverage. Just like it’s important to plan for tax time, it’s critical to plan for any unexpected insurance claims.
Your coverage and provider details should be reviewed on a regular basis, which can be done by using our instant quote generator, where you can get an estimate on market-leading insurance in seconds! Simply enter your occupation and expected revenue to get started! For more information or to get started evaluating your coverage, reach out to a team member today.