Understanding the Basics of Business Taxes
Different business structures pay taxes in different ways. Although there are many taxes that a business might be affected by, 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, several are reported and paid as part of the monthly or quarterly activity statement.
- GST is collected from customers and paid 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
Some business taxes are paid directly to the state revenue office, such as land tax for property and payroll tax once the state threshold of reportable wages is reached. Other common government duties include stamp duty on property transfers.
Income Tax for Businesses
Income tax is calculated 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. Review the ATO Income and deductions for business page for more information. If financial gain is made on the disposal of assets, such as property or shares, capital gains tax is paid on the amount of financial gain and is paid 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-offs, 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.
For an understanding of the basics of personal income tax click here.