One of the main perks of opening a business is the freedom to manage your own venture. Furthermore, if the venture is lucrative, you can expand into other markets. However, a major caveat is the tax liability.
The most time-consuming hassle is related to the number of taxes levied against businesses. The best defence against tax liability is being armed with information that can help you navigate the ATO (Australian Tax Authority) requirements. In addition to payroll taxes, businesses are on the hook for company tax, capital gains tax, and goods and services tax (GST).
Keep reading to learn more about business tax liability and what your responsibilities are as a business owner.
What Are The Main Taxes Australian Businesses Have To Pay?
GST tax refers to taxes paid on goods and services sold or consumed in Australia. When registering with the office, you must submit a BAS statement (business activity statement). When filing GST, businesses typically report expenses paid for goods and serviced and can claim credits for the goods and services they purchase for their business.
The other taxes that are paid to the ATO include a company tax, which is assessed to businesses owned by both residents and non-residents. Capital gains tax is placed on assets that have been disposed of. Finally, payroll tax is a tax on the salary paid to employees and is based on the amount paid every month.
Which Goods And Services Are Taxed?
Most goods and services are taxed, but a good way to determine whether something qualifies or not is to ask yourself whether the product or service was sold as a part of managing the business. Typically, items that are exempt include anything health and medical related, governmental services, donations, international travel, and bank fees. However, if you are not sure, see the ATO guidelines for what is taxed and which items are exempt.
What Businesses Have To File Gst?
The law is pretty clear about which businesses can be taxed and which ones are exempt. Businesses who make more than $75,000 are usually eligible for the tax. Those who run non-profits have to make more than $150,000 to qualify.
How Do You File For GST?
The process for filing for GST begins with registering for GST, and then calculating how much of your sales are taxable. Then, furnish invoices for both how much money you spent on purchases and for your taxable sales. Figure out your credits related to business purchases. Calculate the actual tax and decide how you want to make payments. The final step only requires you submit lodge activity statements (or annual returns), and the pay your tax, or alternatively, wait for your refund.
What Are The Payment Options Available?
There are two primary methods for paying GST. The first is the cash basis, which can be done if you make less than $2 million annually (smaller businesses). You simply pay the entire amount with your return or you can pay in instalments on a quarterly basis. The second is a non-cash basis, and this allows larger businesses (making more than $2 million) to pay their tax on the business activities that cover a certain cycle. Both small and large businesses can pay using the non-cash basis, but small businesses usually pay through cash-basis.
There are a few ways that your tax can be paid once filed. The first is quarterly with each quarters beginning July, October, January, and April. The second payment cycle is reporting earnings annually, and then businesses have the option to pay in instalments.
Reporting Business Income
For business large and small, the best way to handle filing all of your taxes, other than hiring a CPA, is to invest in a good software company. Computer software, as a part of managing your entire business, can help to figure out the numbers much easier. Moreover, it can also help in preventing major errors when calculating tax liability.