Understanding the Basics of Business Taxes
Different business structures pay taxes in different ways. There are many taxes that may affect a business. The main ones are; goods and services tax, income tax, pay as you go withholding tax for employees, payroll tax and excise tax.
Other taxes that a business could encounter are; fringe benefits, capital gains, property, vehicle and other duties and levies administered by state or local governments.
Taxes Paid on the Business Activity Statement
Once your business is registered for the relevant taxes, you will report and pay several of these as part of the monthly or quarterly activity statement.
- The business collects GST from customers and pay it to suppliers, and you pay the difference between GST on sales and purchases.
- PAYG Withholding for employees or suppliers that don’t provide an Australian Business Number.
- PAYG Instalments contribute towards an expected income tax bill.
- Other taxes paid on the BAS (if applicable) are; fringe benefits instalments, fuel tax credits, wine equalisation tax and luxury car tax.
Taxes and Other Fees Paid to State Revenue Offices.
You will pay some business taxes directly to the state revenue office, such as; land tax for property purchases and payroll tax once you reach the state threshold of reportable wages. Other common government duties include stamp duty on property transfers and land tax.
Income Tax for Businesses
Calculate income tax after the end of the financial year, taking into account any PAYG instalments already paid. Tax deductions for business expenses reduce your taxable income and, therefore, your tax bill. You can make financial gain on the disposal of assets, such as property or shares. In this case, you pay capital gains on the amount of financial gain and pay it as part of income tax. Income tax for business is calculated differently according to the type of entity.
Small Business Tax Concessions
Your tax agent can make sure you are claiming all the small business tax benefits that you are allowed through concessions that reduce the amount of tax liability. For example, there are specific concessions for asset write-off, primary producers, fringe benefits or start-up expenses. Concessions also apply in some situations to reduce the amount of capital gains tax payable.
Thinking of Starting or Changing a Business?
Talk to us about adding or cancelling tax registrations, concessions, and planning for the various taxes your business will need to manage.