Everything About Small Business Taxes In Australia
In Australia, establishing a small business on your own can be an excellent way to both make money and act as your boss. In spite of this, there are a few things about the taxation of small businesses in Australia that you need to be aware of, just as there are when beginning any new endeavour.
When it comes to tax time in Australia, the most important information that you need to be aware of will be outlined in the following blog post. In addition to that, we will offer some useful pointers that you can use to lower the amount of taxes you owe. If you are considering establishing a small business in Australia, continue reading to obtain all of the information that you will require.
Small businesses in Australia are subject to the same tax obligations on their income as individual taxpayers are. On the other hand, the rules and regulations concerning the taxation of small businesses can be somewhat difficult to understand.
In this article, we will present an overview of the many forms of taxes that are levied against small businesses in Australia, as well as some pointers on how to reduce your tax liability as much as possible. If you own a small business in Australia, keep reading for some important information on taxation that you won’t want to miss!
Are you the proprietor of a small business in Australia? Do you feel like you can’t keep up with your tax obligations? Don’t fret; you’re not the only one feeling this way. You will learn everything you need to know about the taxation of small businesses in Australia by reading this blog post. In addition, we will go over the various tax deductions that are open to you, and we will offer some suggestions on how you might lower the amount that you owe in taxes.
Maintaining a level of awareness of your tax requirements in Australia is essential if you run a small business there. This article will give you an overview of the various categories of taxes for which you can be responsible, as well as some helpful advice on how to maintain order in relation to these taxes. Read on and educate yourself, regardless of whether you’re just getting started or have been operating your company for a while now; it’s important to be informed!
There are a few things that you need to be aware of in relation to the taxes that apply to small businesses in Australia. You will initially be required to apply for an Australian Business Number (ABN). This one-of-a-kind number serves both to identify your company and to grant you the ability to submit tax returns.
You will also be required to complete an annual income tax return, during which you will determine the amount of tax that you owe as well as whether or not you are eligible for a tax refund. It is imperative that you have a firm grasp of the fundamentals before submitting your tax return because your small business may be subject to a wide variety of additional taxes and deductions.
If you want additional information about the taxation of small businesses in Australia, you can consult an accountant or look at the website of the Australian Taxation Office.
However, keeping up with all of the tax laws and regulations can be extremely challenging. This blog post will provide you with an overview of the tax system in Australia so that you can maintain compliance and keep more of the money you’ve worked so hard to achieve.
Everything from income tax to GST to corporation tax will be discussed in detail here. Read on for some important facts regarding the taxation of small businesses in Australia, regardless of whether you are just starting or have been operating your company for years.
If you are a business owner in Australia and you are like the majority of other business owners there, you probably do not know a lot about the taxes that apply to small businesses. Due to the fact that small businesses are responsible for paying a significant amount of taxes on an annual basis, this may provide a significant challenge.
Each year, taxes amounting to more than $8,000 are paid by the typical Australian small business. That’s a significant amount of money! Continue reading this post if you are interested in learning more about the taxation of small businesses in Australia.
We will provide you with all of the information you require to ensure that you are in compliance with the financial regulations that govern your nation. Please be aware that the information provided in this post does not constitute legal advice and should not be construed as such. If you have any issues regarding your current circumstances, you should always speak with a tax professional or an attorney.
Let’s get started!
Tips To Make Tax Time Easier As A Freelancer
1. Working-from-home deductions
If you’ve been forced to work from home because of the coronavirus, you may be able to deduct some costs from your taxable income because they are directly tied to the production of your income.
Before you can claim a certain amount on your tax return, there are several factors that you need to take into consideration. For instance, you need to determine whether or not you are eligible to use the “shortcut method” that has been temporarily approved by the ATO (which is 80 cents per hour for all additional running expenses) for the period beginning July 1, 2020 and ending June 30, 2021.
It’s possible that other ways of calculation are acceptable as well, and perhaps even more so given your circumstances. It is in your best interest to give some thought to the requirements for claiming a deduction as well as the approach that would work best for you. The website of the ATO contains more information that can be accessed there.
If you have an annual income of more than $4,000, you can be required to make PAYG installment payments. Regrettably, this implies that you have to make tax payments at various points throughout the year.
Make certain that you have obtained an Australian Business Number (ABN). If you don’t have one, many of your customers won’t do business with you. Additionally, the Australian Business Register website makes acquiring one of these certificates a rather simple process.
3. Put money aside, regularly
To ensure that you are able to fulfil your financial responsibility, either save aside money on a consistent basis or be informed about upcoming tax obligations.
Businesses that have registered for an Australian Business Number (ABN) and GST are eligible to receive a business activity statement (BAS) from the ATO on a monthly, quarterly, or annual basis. If you fail to pay your tax or submit your BAS by the due date, you will almost always be required to pay the penalty.
4. Keep receipts
It’s possible that you can get reimbursement for costs associated with freelancing. Keep receipts for things such as the following:
- Home-office equipment
- Car expenditures
- Phone and internet usage
If there is any question about a receipt, you should save it. In addition, your tax preparer or accountant shouldn’t claim any costs for which you don’t have corresponding receipts.
5. Individualized financial holdings
It’s a smart move to keep your personal finances and those related to your freelancing work separate. This may require you to open a transaction account and a savings account dedicated just to your freelance business. Ideally, this account will be linked to the accounting software that you use, allowing you to monitor your business’s financial situation readily.
6. Super contributions
When you are self-employed, you do not have an employer who is responsible for making super guarantee contributions on your behalf. Therefore, it is prudent to make personal contributions to superannuation funds and to look in the long term, particularly with regard to retirement planning. You may be able to claim a tax deduction for any contributions you make to a superannuation fund that is qualified.
7. Consult with a seasoned pro
It may be in your financial best interest to seek the guidance of an expert. It is in your best interest to conduct some research, including the solicitation of recommendations, in order to locate a local tax specialist or accountant who possesses the appropriate expertise to assist you.
And What About Your Deductions?
We are all aware that in order to create money, you have to spend money, and if the money you spend is used toward the production of “assessable” revenue, then your company will typically be eligible for a tax deduction.
A surprising amount of firms make the mistake of not claiming all of the deductions they are eligible for, which may be just as costly as inflating their deductions or claiming for expenses they have no right to.
In point of fact, there are valid deductions that should not be neglected and that practically every company is eligible to take advantage of.
In order to avoid drawing the notice of the ATO, the first rule that you need to follow is to demonstrate that you have paid the expense out of your own personal funds and that it was necessary for the operation of your business.
The following is a list of possible tax deductions that you can claim
1. Commercials and Corporate Sponsorship
Costs incurred to market your brand and garner exposure for your company are tax-deductible and can be claimed, as can costs incurred to sell “trading stock” and hire personnel in the form of advertising or sponsorship. However, you should make sure that the expenses you incur do not fall under the category of “entertainment,” as this type of spending is typically not tax-deductible.
2. Bad Debts
A debt that has not been paid and is considered to be a “bad” debt is eligible for a deduction as long as it was included as assessable income in the current or even a previous income year and that it is written off as bad (uncollectable) in the same year that a deduction is claimed. In other words, the debt must meet both of these requirements for the deduction to be valid.
3. Borrowed Money
The condition that the money must be utilized to produce income that is subject to taxation is a prerequisite for claiming any deductions for the costs that were expended to obtain the borrowed cash. Legal fees, registration fees, appraisal costs, fees to ensure an overdraft, and any commissions paid could be considered part of these expenses.
However, in order to cover the entirety of the loan period, you may be required to spread the deductions out over a period of more than one year, depending on the magnitude of the expenses. These deductions can be taken in addition to the interest that was paid on the borrowed money, which can also be deducted if the money that was borrowed was utilized to generate revenue.
4. Travel for Business Purposes
In most cases, expenses related to travel for business can be claimed. Keep all receipts, as well as your itinerary or travel journal and of course, your plane tickets. Take into consideration the nature of the trip, its objective, as well as the location, date, and length of time of the trip (and look out for any personal activities that are mixed in, as these expenses are non-deductible).
5. Tax Breaks for Automobile Expenses
As long as the car is only utilized for work-related activities, your business is eligible to deduct the full amount of any costs associated with operating a vehicle, regardless of whether the vehicle is leased or owned by the firm.
You may be eligible to take a specified percentage of deductions for car expenses if your company operates as a sole trader or as a partnership; however, these deductions are subject to restrictions for substantiation.
6. Fringe Benefits
In most cases, you are eligible to claim a tax deduction for any costs that are associated with supplying an employee with a fringe benefit.
7. Home Work Claims
Imagine if some or all of your work is performed at the comfort of your own home. In this scenario, you are typically eligible to claim deductions for expenses such as interest, telephone, and insurance costs, in addition to a part of operating expenses such as heating, lighting, or cleaning.
The premiums paid for workers’ compensation insurance are deductible, as are the rates paid for insurance against fire, cars used for business, public liability, theft, and loss of profits.
9. Plant And Equipment (Depreciating Assets)
Larger objects, such as automobiles or buildings, may be claimed as depreciating assets over the course of time. In addition, you may be eligible to deduct (either immediately or over a period of five years) particular capital expenditures incurred during the process of beginning or winding down a firm, provided that an immediate deduction for those costs cannot be taken.
10. Repairs, Replacement, Maintenance
Maintaining the machinery, tools, or premises that are used to earn taxable revenue can qualify as a tax deduction as long as the costs in question are not considered “capital” costs.
These deductions include the costs of painting, maintaining plumbing and electrical systems, doing repairs on windows and fences, cleaning gutters, and maintaining machines. In most cases, it refers to the elimination of flaws rather than the substitution of a product, and it does not include any enhancements or labour performed immediately following the purchase of an asset.
11. Superannuation Contributions
If you are self-employed, you may be eligible to receive a tax deduction for any contributions made to your retirement account. However, extreme caution is required if you also have earnings from employment because those earnings may be subject to super contributions that your employer has already paid.
It should also be tax-deductible for employers to contribute to employees’ retirement funds. According to the superannuation guarantee laws, it is mandatory for employers to make contributions to their employee’s retirement funds.
12. Pay, Remuneration, and Wages
If you run your enterprise as either a trust or a corporation, you are eligible to take a tax deduction for any salaries given to either your employees or to yourself, provided that the salaries are directly related to the responsibilities associated with running the firm.
A deduction can be taken for salaries paid to employees other than partners in a partnership, but a partnership cannot take a deduction for salaries paid to partners. It is not possible for sole proprietors to make a tax claim for a wage paid to themselves, and it is also not possible to make a claim for money taken out of the business for personal use.
13. Tax Management Expenses
Keeping up with the tax responsibilities of your company can come at a cost, but you can deduct those expenses. This includes the costs of hiring a bookkeeper, having a tax agent prepare and lodge tax returns and activity statements, attending a tax audit, or appealing or objecting to an assessment, as well as the fees associated with those activities.
You can deduct the cost of calls and rent for a telephone that is used solely for business, but installation is not deductible. If the phone is used for both business and personal calls, you are entitled to deduct the full cost of business calls plus a portion of the rental fee from your taxable income. You can choose to base the claim on a representative four-week period instead of an itemized phone account in order to get an average rate for the entire year. This will steer you in the right direction.
It’s possible that you can deduct any losses you incurred as a result of an employee’s theft or stealing.
Remember That You Should Keep Records
It’s possible that staying on top of your paperwork will be the very last thing on your to-do list when it comes to running a small business. Therefore, in the meantime, that you are concentrating on running and expanding your business, our team is able to assist you with organizing your records and locating the appropriate deductions.
Additional Financial Advice for Owners of Small Businesses
The following is a list of other tax planning methods that you and your accountant should discuss.
1. Cash Accounting for the GST
This means that you should account for GST using a cash basis rather than an accrual approach. As a result, you should pay GST to the ATO when you collect it rather than when you issue your invoice. Cash accounting for GST is also beneficial to enhancing your company’s cash flow.
2. Rollover for Restructuring of Small Businesses
When considering switching from a family partnership to a family trust, it is helpful to apply this tax planning method because it can help you save money. Imagine that you are a local, family-owned, small business (SBE).
If this is the case, then you are permitted to transfer an active asset of your company (such as goodwill) to another SBE as part of a real business restructure, provided that the ownership of the assets is not altered in any way. This indicates that there will be no tax due on the capital gains. However, there is a possibility that the state transfer tax will still apply.
3. Instant Asset Write-Off Vs Depreciation
You could qualify for the government’s quick asset write-off, which is available to businesses with annual revenue of less than $500 million. In order to do so, you will need to meet certain criteria.
Nevertheless, as part of your overall tax planning, you should compare better: immediate asset write-off vs depreciation.
In a nutshell, as businesses expand and produce more money, there may be a bigger advantage in not using the instant asset write-off. This is due to the fact that you may miss out on recurring deductions and depreciation if you do use the write-off.
Information that is helpful to small businesses on Simpler depreciation may be found on the ATO website.
What Types of Compensation Are Available to Real Estate Agents?
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
You probably use your car more frequently than the average person because you work in real estate. Your vehicle will experience wear and tear as a result of travelling to and from open houses, interacting with potential buyers and sellers, and fulfilling various other obligations. You might want to think about whether maintaining a logbook or a percentage agreement would be more helpful to you in the long run. Talk to your tax preparer about the options that will benefit you the most. In addition to that, a tax advisor must be POP.
All of your electronic devices, including your mobile phone, laptop, and tablet, are utilized in marketing and communication. These are essential tools for the job, but aside from those, what other methods do you employ to keep in touch with your clients, as well as the office and other employees? If you are a real estate agent, you are expected to be reachable at all hours of the day and night. Although this can be a huge detriment in day-to-day living, it also has the potential to be an effective tax weapon.
The tools that are utilized by real estate brokers have seen significant development over the course of the past decade. Only a few short years ago, technology such as drones and camera equipment, enhanced photographic gear, and a lot of other innovations would have been impossible. Now, however, they are commonplace.
This is vital to keep in mind both when it comes time to file your taxes and when you are contemplating the purchase of new equipment that could assist make your job easier. When making a purchase, it is important to examine the potential tax repercussions, as you may want to think about buying things earlier in the year if there are any potential tax savings.
If you wear a uniform that bears a company logo, the cost of purchasing such an outfit is very certainly tax-deductible. You may also submit a claim for washing and laundering expenses, which may include the cost of using both your washing machine and a professional laundry service.
5. Home Office
Even if you have a physical office that you travel to every day, you probably still have an area in your house dedicated to fielding phone calls from customers, replying to emails, and scheduling appointments. This can be claimed as a percentage of either your rent or your mortgage, providing you with the possibility of large tax advantages.
Whether you are self-employed or an employee of an agency will determine whether you need your marketing equipment or not. If you have your own business and pay for things like signs and web marketing, such expenses can be deductible from your taxes.
If you work for an agency, there is a good chance that these expenditures were immediately absorbed by your employer; hence, there is no benefit for you to receive from this arrangement. On the other hand, if you went out of your way to purchase brochures or stationery on your own, you have every right to submit a claim for reimbursement.
Is the Information on Your Return Accurate And Up to Date?
Having information that is accurate and up to date is another essential component of effective tax planning. This component can assist you in maximizing your deduction and provide you and your accountant the ability to make educated decisions regarding your taxes. These are the following:
ensuring that the logbooks associated with your company vehicle are up to date. If the logbook you are currently using is more than five years old or if the way you use your car has changed dramatically, you will need to start a new logbook. You may also give some thought to purchasing one of the several digital apps that are already available for keeping track of your miles.
If your company keeps any stock, you should conduct your stocktake on June 30th, 2019. Note that you are exempt from conducting a stocktake if the difference between your estimated closing stock and your estimated opening stock is less than $5,000.
When claiming the goods and services tax (GST) on expenses, it is necessary to take into account any private use of corporate assets, such as motor cars. Consider the following scenario: you are claiming the full amount of GST on your motor vehicle expenses, but you only used the vehicle for private purposes 20% of the time. If this is the case, you will need to make the necessary adjustments to your yearly GST private apportionment claim in order to account for this personal use.
Have You Been Affected By The COVID-19?
If the situation caused by COVID-19 has had a negative impact on your company, the ATO may be able to offer assistance by the following means:
The provision of additional time for you to pay your tax payment or submit tax paperwork such as activity statements
Providing qualifying firms with cash flow enhancements ranging from $20,000 to $100,000 that are exempt from taxation
Create a payment plan for your taxes that is tailored to your specific situation and includes an interest-free time
Cancellation of any fines or interest that have been imposed during the time that your company has been harmed.
You can use the deductions function in the ATO app to keep a record of your deductions during the financial year and then upload this record when it comes time to lodge your tax return. This is possible regardless of whether you intend to lodge your tax return on your own or hire a professional.
Some Tips From Small Businesses That Are Killing It
1. Provide a pleasant and consistent experience for the customer
You need your company to be profitable almost first before you can think about expanding it. When you work for an employer, the business model is already established; the focus is on the implementation of the idea. However, when you start your own company, the primary focus should be validating the concept and constructing the necessary infrastructure.
2. Give it a more individual flavour.
Everyone in the majority of service businesses is selling essentially the same thing; all you need to do is do the same thing. When we are dealing with a new client, our primary objective is to form a relationship with them and to make them feel as though they are unique.
Ensure that people will remember you. Face-to-face interaction with each and every one of our clients is one of our highest priorities. Establishing a good rapport is essential because it is the primary factor that will result in repeat business and an ongoing source of income.
3. Leverage social media
In every field, having a solid marketing strategy is absolutely necessary. That entails engaging in social networking, either on LinkedIn, Twitter, Instagram, Facebook, or all of the aforementioned platforms simultaneously. Because a company’s brand is its most valuable asset, doing everything in one’s power to raise that brand’s visibility among consumers is essential.
4. Create your manual for running a business.
It is possible to become overwhelmed by the quantity of information that is available. Whenever you have a thought or a suggestion, jot it down in a journal or on your tablet. It has helped a lot of people make some important decisions, and it has also saved them a lot of time that they would have spent looking for something they read someplace else.
5. Pay attention to your area of expertise.
In the early years of your company, there may be a lot of pressure to diversify the products and services you provide. Keep focusing on what you are good at, and strive to do it better and with more concentration than anyone else.
6. Strive for the stars and don’t give up
When embarking on the challenging journey of starting a new small business, one of the most important qualities you may possess is determination. Have faith in both your abilities and your capabilities. Never accept “no” as an adequate response. There will be challenges to overcome along the path, but every issue has an answer or alternative potential course of action.