In 2021 Tax Tips

Everything About Small Business Taxes In Australia

Starting a small business in Australia can be a great way to make money and be your boss. However, as with any new venture, there are a few things you need to know about small business taxes in Australia.

This blog post will outline the main things you need to be aware of when it comes to tax season in Australia. We will also provide some helpful tips on how to reduce your tax bill. So if you are thinking of starting a small business in Australia, read on for all the information you need!

Like individual taxpayers, small businesses in Australia have to pay taxes on their income. However, the rules and regulations surrounding small business taxation can be a little complicated. 

In this blog post, we will provide an overview of the different types of taxes that small businesses in Australia are subject to and some tips on how to minimise your tax bill. So if you’re a small business owner in Australia, read on for essential information about taxation!

Are you a small business owner in Australia? Are you feeling overwhelmed by your taxes? Don’t worry; you’re not alone. This blog post will teach you everything you need to know about Australian small business taxes. In addition, we’ll discuss what tax deductions are available to you, and we’ll give you some tips on how to reduce your tax bill.

As a small business owner in Australia, it’s important to stay up-to-date on your tax obligations. This article provides an overview of the different types of taxes you may be liable for, as well as some helpful tips on how to keep everything organised. So whether you’re just starting out or you’ve been running your business for a while, make sure to read on and get clued up!

When it comes to small business taxes in Australia, there are a few things you need to know. First, you must register for an Australian Business Number (ABN). This unique number identifies your business and allows you to file tax returns. 

You will also need to complete an annual income tax return, determining how much tax you owe or are eligible for a refund. In addition, many other taxes and deductions may apply to your small business, so it’s important to understand the basics before filing your return. 

For more advice on small business taxation in Australia, speak with an accountant or check out the Australian Taxation Office website.

But understanding all the tax laws and regulations can be daunting. This blog post will give you an overview of the Australian tax system, so you can stay compliant and keep more of your hard-earned money. 

We’ll cover everything from income tax to GST to company tax. So whether you’re just starting out or you’ve been running your business for years, read on for essential information about small business taxation in Australia.

If you’re like most business owners in Australia, you probably don’t know much about small business taxes. This can be a big problem since small businesses are responsible for paying many taxes every year. 

The average small business in Australia pays over $8,000 in taxes every year. That’s a lot of money! If you want to learn more about small business taxes in Australia, keep reading this post. 

We’ll give you all the information you need to make sure you’re compliant with the tax laws in your country. Note that this post is not legal advice and should not be taken as such. Always consult an accountant or lawyer if you have any questions about your specific situation. 

Let’s get started!

Tips To Make Tax Time Easier As A Freelancer

1. Working-from-home deductions

If you’ve been working from home due to the coronavirus, you may be entitled to claim tax deductions for expenses related to generating your income. 

There are several criteria to consider before claiming an amount in your tax return; for instance, you should consider whether you can claim the temporary ATO approved “shortcut method” (of 80 cents per hour for all additional running expenses) for the period July 1, 2020, until June 30 2021. 

Other calculation methods may also be acceptable and more appropriate to your circumstances. It would be best to consider which method is best for you and the criteria required to claim a deduction. Further information is available on the ATO website.

2. Pay-as-you-go

If you’re earning more than $4,000 a year, you may have to pay PAYG instalments. Unfortunately, this means you must make tax payments throughout the year.

Make sure you have an Australian Business Number (ABN). Many clients will not deal with you if you don’t have one. In addition, they are relatively easy to obtain via the Australian Business Register website.

3. Put money aside, regularly

Make sure you regularly set money aside or are aware of future tax payments so that you can meet your obligation.

The ATO issues a business activity statement (BAS) monthly, quarterly or annual basis to businesses registered for an Australian Business Number (ABN) and GST. You’ll generally be liable to pay the penalty if you don’t lodge your BAS or pay your tax on time.

4. Keep receipts

You may be able to claim for freelance-related expenses. Keep receipts for things like:

  • Home-office equipment
  • Car expenses
  • Phone and internet usage

If in doubt about a receipt – keep it. Also, your accountant or tax agent should only claim expenses that you have receipts for.

5. Separate bank accounts

It’s a good idea to keep your finances separate from your freelance finances. That may mean setting up a transaction and savings account specifically for your freelance business that ideally links to your accounting software so you can easily keep track of your finances.

6. Super contributions

Being self-employed means, you don’t have an employer to make super guarantee payments on your behalf. So it’s wise to think long term, especially when it comes to retirement, and make personal contributions to super. Contributions you make to an eligible super fund may be tax-deductible to you. 

7. Chat to an expertf

Getting expert advice could save you money. It’s worth doing some research, including asking for recommendations, to find a local tax expert or accountant with the right skills to help you.

And What About Your Deductions?

We all know you’ve got to spend money to make money, and if you spend it to produce ‘assessable’ income, then your business will usually be entitled to a tax deduction. 

Many businesses trip up by inflating their deductions or claiming for something they shouldn’t, but a surprising number also miss out on deductions they could have claimed.   

In reality, there are legitimate, not-to-be-forgotten deductions that almost every business can take advantage of.

The basic rule, of course, to avoid the attention of the ATO, is that you need to show you are ‘out-of-pocket’ and that the expense has been incurred to run your business.

Here Are Tax Deductions You May Be Able To Claim

finance accounting concept business woman holding coin desk

1. Advertising And Sponsorship

Costs to promote your brand and garner publicity for your business are deductible and can be claimed, as can advertising or sponsorship to sell ‘trading stock’ and hire staff. However, ensure that the costs incurred do not fall within the definition of ‘entertainment’, which is not usually deductible.

2. Bad Debts

A debt that is unpaid and deemed to be a ‘bad’ debt is an allowable deduction as long as it was included as assessable income in the present or even a previous income year and that it is written off as bad (uncollectable) in the same year that a deduction is claimed.

3. Borrowed Money

Expenses incurred to get the borrowed funds can be claimed as a deduction, the proviso being that the money must be used to produce assessable income. These expenses can include legal costs, registration fees, valuation costs, fees to guarantee an overdraft and any commissions paid. 

But you may have to spread the deductions over more than one year, depending on the extent of the expenses, to cover the loan period. These deductions are separate from the interest incurred on the borrowed funds, which is also deductible if the borrowed money is used to produce income.

4. Business Travel

Travel for business purposes can usually be claimed. Keep all receipts and your itinerary or diary and, of course, airline tickets. Note the nature of the travel, its purpose, and where, when, and for how long (and look out for any personal activities that are mixed in, as these expenses are non-deductible).

5. Car Expense Deductions

You can claim a full deduction for any expenses your company incurs while running a vehicle, leased or owned, provided the vehicle is used only for business purposes. 

If your business operates as a sole trader or partnership, you can claim certain proportions of deductions for vehicle expenses, but they are subject to substantiation rules.

6. Fringe Benefits

You can generally claim a deduction for any costs involved with providing a fringe benefit to an employee.

7. Home Work Claims

Suppose your work is done from home or is partly home-based. In that case, you can usually claim deductions for expenses such as interest, telephone, insurance and a portion of running expenses like heating, lighting or cleaning.

8. Insurance

Workers compensation insurance premiums are deductible, as are insurance costs for fire, business-use cars, public liability, theft and loss of profits.

9. Plant And Equipment (Depreciating Assets)

Larger items like cars or buildings can be claimed over time as depreciating assets. And you may also be able to claim (either immediately or over five years) certain capital costs in setting up or ceasing a business, as long as an outright deduction can’t be claimed for that expenditure.

10. Repairs, Replacement, Maintenance

A deduction is available for the upkeep of machinery, tools or premises used to produce assessable income (provided they are not ‘capital’ costs). 

These deductions include painting, plumbing and electrical maintenance, upkeep to windows and fences, guttering and machinery maintenance. Generally, it means fixing defects, not replacing an item, and does not include improvements or work done immediately after acquiring an asset.

11. Superannuation Contributions

You can claim a deduction for a contribution made to your super fund if self-employed. However, care must be exercised if you also have some earnings from employment upon which the employer has paid super contributions. 

Contributions to an employee’s fund should also be deductible. Employers legally must contribute to employees’ super under the superannuation guarantee laws.

12. Salary And Wages

Operating as a trust or a company means you can claim a deduction for salary paid to employees or yourself, provided the salary is related to duties connected with the business. 

Partnerships can’t claim for salary paid to a partner, but a deduction is available for salary paid to other employees. Sole traders can’t claim for salary paid to themselves (and you can’t claim for amounts taken from the business for private purposes).

13. Tax Management Expenses

Managing your business tax affairs can cost, and you can claim these as deductions. This includes paying a bookkeeper, having a tax agent prepare and lodge tax returns and activity statements, attending to a tax audit or the costs of appealing or objecting to an assessment.

14. Telephones

For a telephone you use for business only, you can claim calls and rental, but not installation. If the phone is used for both business and private calls, you’re able to claim all business calls and a proportional part of the rental. An itemised phone account will guide this, but you can also base the claim on a representative four week period to get an average rate for the whole year.

15. Theft

Losses incurred by theft or stealing by an employee may be allowable deductions.

Don’t Forget To Keep Records

When it comes to running a small business, keeping on top of your paperwork may be the last thing on your to-do list. So while you focus on running and growing your business, our team can help get your records in order and discover the right deductions.

Additional Tax Tips For Small Business Owners

Below are some additional tax planning strategies to discuss with your accountant.

1. GST Cash Accounting

This means accounting for GST on a cash basis rather than accruals, so you pay GST to the ATO when you collect it, not when you issue your invoice. GST cash accounting is also good for improving your cash flow.

2. Small Business Restructures Rollover

This tax planning strategy is useful when you may be looking to change from a family partnership to a family trust. Suppose you’re a small business entity (SBE). 

In that case, you can transfer an active asset of your business (such as goodwill) to another SBE as part of a genuine business restructure, where there is no change in the ownership of the assets. This means no capital gains will be payable. However, state transfer tax might still apply.

3. Instant Asset Write-Off Vs Depreciation

You could take advantage of the Government’s instant asset write-off, which affects those with an annual turnover of less than $500 million.

However, as part of your tax planning, you should compare better: instant asset write-off vs depreciation.

In a nutshell, as businesses grow and make more income, there may be a greater benefit in not using the instant asset write-off, as you may lose out on ongoing deductions and depreciation.

The ATO provides useful information on Simpler depreciation for small businesses.

What Can Real Estate Agents Claim For?

Being a real estate agent means long hours, loads of travel, and dealing with indecisive buyers and slow-acting sellers. It’s great when things are going well, but it can also be the most frustrating career ever – sometimes all in the same week. So here are our top tax tips for real estate agents.

1. Your Car

As a real estate agent, you use your vehicle more often than most people. Travelling to and from open homes, meeting with buyers and sellers, and numerous other requirements will take their toll on your vehicle. You may wish to consider whether keeping a logbook or a percentage arrangement would be more beneficial. Speak to your tax advisor about what’s best for you. Also, a tax advisor should be POP.

2. Communications

Your mobile phone, laptop and tablet are all used for communications and marketing. These are mandatory tools of the trade, but what else do you use to maintain contact between yourself, the office and your clients? As a real estate agent, you are required to be in touch 24/7, and while this can be a significant disadvantage in day-to-day life, it also has the potential to be a powerful tax tool.

3. Equipment

Over the last decade, the equipment used by real estate agents has evolved considerably. Drone and camera equipment, advanced photography gear and many other technologies that would have been considered unthinkable only a few years ago are now standard. 

This is important at tax time and when you are thinking about purchasing technology that could help make your job easier. Consider the tax implications of making a purchase, as you may want to consider buying things earlier – especially when there are tax advantages.

4. Uniform

If you have a uniform with a logo on it, it is most likely tax-deductible. Additionally, you can claim for washing and laundering, including the usage of your washing machine and a laundry service.

5. Home Office

Even if you have an office that you go to, you likely have space put aside at home for taking calls from clients, responding to emails and setting up meetings. This can be claimed as a percentage of your rent or mortgage and presents potentially significant tax advantages.

6. Marketing

Marketing equipment depends on whether you are self-employed or an employee of an agency. If you are self-employed, costs such as signage and online marketing can potentially be deducted. 

If you work for an agency, it’s more likely that these costs were absorbed directly by your employer, so there is no advantage to you. However, if you took it upon yourself to buy stationery or any brochures, then you can certainly claim them.

Is Your Return Correct And Current?

close up detail professional serious accountant sitting light office checking company finance profits calculator

Having accurate and current information is another important aspect of tax planning that can help you maximise your deduction and allow you and your accountant to make informed tax decisions. This includes:

Ensuring the logbooks for your business vehicle is up-to-date. You’ll need to start a new logbook if your current one is more than five years old or your vehicle usage has changed significantly. You could also consider investing in one of the many mileage tracking digital apps available.

If your business carries stock, do your stocktake on June 30 2019. NB: If your estimated closing stock (and opening stock) is less than $5,000, you do not have to do a stocktake.

Accounting for the private use of business assets, such as motor vehicles, when claiming GST on expenses. For example, suppose you’re claiming 100 per cent GST on motor vehicle expenses, but 20 per cent of the vehicle’s use was private. In that case, you’ll need to adjust your annual GST private apportionment claim to factor in this personal use.

Been Impacted By COVID-19?

If the COVID-19 crisis has negatively impacted your business, the ATO may be able to offer assistance by:

Giving you extra time to pay your tax bill or lodge tax forms such as activity statements

Providing tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses

Setting up a tax payment plan based on your circumstances, including an interest-free period

Revoking penalties or interest charged for the period your business has been affected.

Whether you plan to lodge your tax return yourself or use a professional, you can use the deductions tool in the ATO app to save a record of your deductions throughout the financial year, which you can upload at lodgement time.

Some Tips From Small Businesses That Are Killing It

1. Deliver a consistent customer experience

Damian Cerini, owner of the cycling tour business Tour de Vines, says you need your business to run it almost before you look at growth. “The thing about working for an employer is that the business model is already set; it’s about the execution of the idea, whereas a new business is about testing the idea first and developing the systems.”

2. Add a personal touch

Angus Askew, co-director of commercial asset financing company Magnolia Lane Financial Services, says: “In our industry, like most service industries, everyone is essentially selling the same thing; you’ve just got to do Whene goal when dealing with a, our number one goal new client is to establish a relationship and make them feel special. 

Make sure you are remembered. We make it our priority to see all of our customers face to face. Create a rapport as this is what will result in repeat business and an income stream for life.”

3. Leverage social media

A strong marketing strategy is essential in every industry, says Anthony Kittel, director of manufacturing firm REDARC. That means social networking — on LinkedIn, Twitter, Instagram, Facebook, or all above. “Our brand is everything, so whatever we can do to promote that brand and consumer awareness is critical.”

4. Write your own business bible

Matthew White, whose firm Ergoflex sells memory foam mattresses, says the volume of information available can be overwhelming. He recommends writing ideas and tips in a notebook or tablet as they come up. “It has helped me make some major decisions and also saved me hours of searching for something I’ve read somewhere.”

5. Focus on your specialty

There can be a lot of pressure to diversify your offering in the first few years, says Paris Cutler, director of cake decorating company Planet Cake. “Stick to what you do best and do it better and with more focus than anyone else.”

6. Outsource the things you don’t do

Resist the temptation to chase work outside your offering, and use a specialist to fill in any gaps, says Rhys Roberts from accountancy firm Viridity. “I outsource my HR, my IT, much of my marketing and more. The time you free up, you can spend doing what you are good at.”

7. Aim high and be persistent

Determination is one of the vital qualities needed when you start on the long road of setting up a small business. Rochelle Miller, the co-founder of fashion retailer Another Love, says: “Believe in yourself and your strengths. Don’t take ‘no’ for an answer. There will be bumps along the way, but everything has a solution or another option.”

8. Embrace a life less frantic

Kelly Exeter, author and editor of Flying Solo‘s small business community, says it’s all about finding the right balance for you. “I am learning that I don’t just need physical space to thrive; I need mental space too.”

9. Follow your own path

Designer and illustrator Beci Orpin says she’s not naturally business-minded but has always worked hard and built up a strong folio of work. “My business is all about me: my style and what I create, so an important part of developing that was staying true to myself — not worrying about what other people were doing.”

10. Take time out to think about how to improve

Use your best hour in the day to consider ways of moving forward, advises Andrew Griffiths, a small business author and consultant. He does this first thing every morning. Then, each Friday, “I find a quiet place and ask myself a question: ‘How is my business better this week than it was last week?’”

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