Running a small business in Australia can be an exciting and challenging experience. One of the critical aspects of running a small business is managing taxes. In Australia, the Australian Taxation Office (ATO) is responsible for administering taxes in Australia. 

Read on as we provide this guide to small business taxes in Australia, including the types of taxes, tax obligations, and tips on how to manage taxes. 

The Types of Taxes in Australia

There are several types of taxes that small businesses in Australia should be aware of. These taxes include:

Goods and Services Tax (GST)

This is a tax of 10% that is charged on most goods, services, and items sold in Australia. Small businesses with an annual turnover of less than $75,000 are not required to register for GST. Businesses that are registered for GST must charge GST on goods and services sold and can claim credits for GST paid on business expenses.

Income Tax

This is a tax on the profits earned by a business. Small businesses in Australia are taxed

on their assessable income, which is the total revenue minus allowable deductions. The

tax rate may differ based on the type of business structure and size.

Pay-As-You-Go (PAYG) Withholding

This is a tax that employers must withhold from their employees’ salaries or wages. The amount withheld is based on the employee’s income, tax file number, and other relevant information. Employers are required to report and pay PAYG withholding amounts to the ATO.

Fringe Benefits Tax (FBT)

This is a tax on non-cash benefits provided to employees, such as company cars and entertainment expenses. Small businesses that provide fringe benefits to their employees may be required to pay FBT.

4 Tax Obligations Every Small Business Owner Should Know

Small businesses in Australia have several tax obligations that they must meet. These obligations include:

1. Registering for an Australian Business Number (ABN)

An ABN is a unique 11-digit number that identifies a business to the government and the community. Small businesses are required to register for an ABN before they can register for GST or other taxes.

2. Registering for GST

Small businesses with an annual turnover of $75,000 or more must register for GST. Businesses that are registered for GST must charge GST on goods and services sold and can claim credits for GST paid on business expenses.

3. Lodging Business Activity Statements (BAS)

A BAS is a form that businesses use to report and pay their GST and other taxes, such as PAYG withholding and FBT. Small businesses that are registered for GST must lodge a BAS either monthly, quarterly, or annually.

4. Keeping Records

Small businesses in Australia are required to keep accurate records of their income and expenses. This includes invoices, receipts, and bank statements.

4 Essential Tips for Managing Taxes

There are several tips that small businesses can use to manage their taxes effectively, such as:

1. Seek Professional Advice

Small businesses should seek professional advice from a tax accountant or advisor. A tax professional can help small businesses understand their tax obligations and provide advice on how to manage their taxes effectively.

2. Keep Accurate Records

Small businesses should keep accurate records of their income and expenses. This includes invoices, receipts, and bank statements. Accurate records can help small businesses claim all the deductions they are entitled to and avoid any penalties for incorrect reporting.

3. Plan Ahead

Small businesses should plan ahead for their taxes. This includes setting aside money for taxes and ensuring that they have enough cash flow to meet their tax obligations.

4. Use Tax Software

In this modern age, you can make the most out of technology. Small businesses can use tax software to manage their taxes effectively. Tax software can help small businesses keep track of their income and expenses, calculate their taxes, and lodge their BAS online.

Conclusion

Managing taxes is a critical component of running a small business in Australia. Small businesses in Australia are required to pay several types of taxes, meet several tax obligations, and manage taxes effectively through professional advice, careful planning, and the right tools. By following these tips, small businesses can manage their taxes effectively and avoid any penalties for incorrect reporting.

Are you looking for small business accountants in Perth? Prosperity Accountants is a team of professionals who can guide small businesses through financial planning and obligations. Work with us today!