Tax Basics For Businesses In Australia

Tax Basics For Businesses In Australia

It is essential to educate yourself on the various facets of taxation if you are the owner of a company in Australia, as this is your responsibility. This includes being aware of the taxes that are applicable to your company, the process for registering for tax purposes, and the deductions for which you are qualified.

This post on the blog will provide an outline of the most significant fundamental tax concepts for companies operating in Australia. Continue reading if you are thinking about launching a new company or are interested in learning more about the rules governing taxes in Australia.

Businesses in Australia are required to pay income tax in addition to the Goods and Services Tax (GST). The income tax rate that applies to enterprises is 27.5 percent, which is a lower percentage than the income tax rate that applies to individuals.

The goods and services sold in Australia are subject to a value-added tax known as GST, which is levied at a rate of 10 percent. However, there are some things that are not subject to the GST, such as fresh food, a medication that requires a prescription, educational courses, and exports.

Beginning a business in Australia may be a highly rewarding experience; nevertheless, it is essential to have a solid understanding of the many different tax laws and regulations that are in place.

This article offers a summary of the primary types of taxes that companies need to be aware of, such as income tax, GST, Pay As You Go (PAYG) withholding, and FBT. In addition to that, it discusses how one can register for these taxes and how one can pay their taxes.

If this is your first time operating a company in this nation, it is imperative that you educate yourself on the fundamentals of taxation in order to maintain compliance with the law and steer clear of any expensive fines or penalties. This book will walk you through the fundamental ideas that you need to understand, including things like depreciation, GST, PAYG, and more.

Read on for important information on the taxes that apply to businesses in Australia, whether you are just starting out or have been in business for some time but want to make sure you are complying with all of the regulations.

It is essential to have a fundamental understanding of Australia’s taxes system. This will assist you in ensuring that you are in compliance with tax regulations and that you are taking full advantage of all of the tax deductions and concessions that are available to you.

This blog article will offer an introduction to some of the fundamental tax concepts that apply to businesses in Australia. In addition to that, we will discuss some significant deadlines that proprietors of businesses need to take into consideration. If you want an introduction to the tax laws that apply to businesses in Australia, continue reading!

Do you have a good understanding of the type of legal entity you are as well as the tax bracket you belong to? This article will provide an outline of the tax system that applies to enterprises in Australia so that you may gain a better understanding of the tax obligations that fall on your shoulders. In this section, we will discuss the various types of entities and explain how to register for GST or QST.

As a proprietor of a company in Australia, you have a lot of decisions to make in relation to the payment of your taxes. However, however, it can be difficult to ensure that you are in compliance with all of the requirements, and it can be even more challenging to grasp what those regulations are in the first place!

This blog post’s primary purpose is to give Australian businesses some fundamental information regarding tax fundamentals. We will go over some of the most significant topics so that you will have a better knowledge of what you need to do when it comes time to file your taxes.

It does not matter what line of work you are in; having a solid understanding of tax fundamentals is critical. When it comes to the topic of paying taxes in Australia on the money you make from your business, there are a few very important aspects that you need to be aware of.

This article will provide you with an overview of the most important laws and policies that are applicable to enterprises in this country. If you have a firm grasp of the fundamentals, you may be assured that you are fulfilling your responsibilities and warding off any potentially expensive fines or penalties.

We really hope that this material will be of use to you!

Taxes on the Income of Corporations

Companies that have their primary headquarters or significant operations in Australia are considered to be tax residents of Australia for tax purposes. In most cases, non-resident firms are only required to pay income tax in Australia on the income they receive from sources within Australia.

The right of Australia to tax corporate profits is normally limited to profits that are due to a permanent establishment (PE) in Australia. However, where a firm is a resident in a country, Australia has concluded a double taxation agreement (DTA).

On their taxable income, all companies are subject to a federal tax rate of 30 percent, with the exception of “small or medium business” companies, which are subject to a reduced tax rate of 25 percent for the 2021/22 income year (26 percent for the 2020/21 income year). This lower tax rate applies only to companies that have fewer than 500 employees.

Only those businesses that, combined with certain other entities that are considered to be “related,” with an aggregated yearly revenue that is less than AUD 50 million are eligible for the reduced tax rate.

Integrity measures also ensure that a company will not be eligible for the reduced rate of taxation unless the specifically defined passive income (which may include, among other things, interest, rents, and net capital gains) that it derives represents no more than 80 percent of the company’s total assessable income for the year. This ensures that the company is not taking advantage of any loopholes in the system.

Utilization of Company Funds or Assets for Personal Purposes

There are regulations that must be followed in order to withdraw money from your company or use its funds or assets for personal or family expenses. This is typically accomplished by:

  • payments of salary, wages, or directors’ fees – regulations for the corporation for withholding, superannuation, and payroll reporting;
  • provision of fringe benefits – the company is responsible for paying any applicable taxes on fringe benefits;
  • reimbursements of funds borrowed by the company;
  • franking credits can be included in dividends, which are a type of profit distribution.
  • corporate loans.

The ATO has a particular interest in the private use of corporate funds or assets, and the agency warns that getting this area of the law wrong can have expensive repercussions.

Division 7A

According to Division 7A of the Internal Revenue Code, the Internal Revenue Service can classify as a dividend any payment or other benefit that is made by a private firm to a shareholder or an associate of the shareholder.

Unless an exemption is applicable, the following may be treated as presumed dividends by the income tax regulations for a taxpayer, even if they are not franked:

  • a payment or loan made by a private corporation to an investor or an associate (such as a member of the shareholder’s family);
  • releasing a shareholder or affiliate from their financial obligations;
  • the utilization of a firm asset by a shareholder or associate of the shareholder;
  • the act of giving an asset of a firm to one of its shareholders or an associate of one of those shareholders.

The most frequent way to avoid this requirement is by entering into a written loan agreement that specifies the minimum amount of interest and principal that must be repaid throughout the course of the loan’s tenure. This might be anything from seven to twenty-five years, depending on the stability of the loan.

A private firm can reduce the likelihood of a shareholder or an associate receiving a considered dividend by taking a number of preventative measures before the filing deadline for its income tax return for the tax year 2020–2021, which is April 15, 2021.

When a private corporation has a present unpaid entitlement (UPE) to the trust’s income, Division 7A also applies to certain advantages that are offered to shareholders or their associates from trusts. These benefits come from the trust itself.

Goods and Services Tax (GST)

The Goods and Services Tax (GST) is levied at a rate of ten percent by the federal government, which then gives the revenue collected to the state governments. The Goods and Services Tax (GST) is a value-added tax (VAT) that is levied at each stage of the manufacturing and marketing chain. It applies to the vast majority of goods and services, and registered vendors can earn credits for the Goods and Services Tax (GST) on inputs they purchase to make taxable supplies.

Products that are “GST-free” (the equivalent of “zero-rated” in other VAT jurisdictions) and are not therefore liable to the GST include food (with a few key exclusions), exports, the vast majority of health, medical, and educational supplies, and certain other supplies. As a consequence of this, a registered provider of a GST-free supply is eligible to reclaim appropriate input tax credits, despite the fact that the supply does not incur any tax liability.

Residential rents, the supply of residential premises for the second time or later, the vast majority of financial services, and certain other goods are considered to be “input-taxed” rather than “exempt” in other VAT countries and are therefore not subject to GST. On the other hand, the supplier is unable to recoup any applicable input tax credits, with one notable exception: financial providers may claim a reduced input tax credit equal to 75% of the GST to pay for specific services.

Insurance for medical expenses is exempt from GST. Input taxes are applied to life insurance policies. Taxes are applied to general insurance. There is a possibility that reverse charges will apply to any services or rights that are offered from offshore locations. The recipient is required to be registered or is registered themselves, and they utilize the supply wholly or in part for a supply that does not qualify for credit.

The Goods and Services Tax (GST) is applicable to international sales of digital items and services that are brought into Australia by consumers. This legislation ensures that digital products and other imported services from foreign businesses that are supplied to Australian customers are subject to the Goods and Services Tax (GST). The Goods and Services Tax (GST) must be registered for, collected from, and remitted by non-resident suppliers who sell digital goods and services to customers in Australia.

The manner in which the regulations of Australia’s GST apply to all cross-border supplies that involve non-resident firms works to ensure that non-resident enterprises are not required to participate in Australia’s GST system unless it is absolutely necessary for them to do so. This includes turning off the GST obligation for certain supplies made between non-residents and extending the GST-free regulations to certain supplies made to non-residents. Additionally, this includes switching off the GST liability for certain supplies made between non-residents.

By ensuring that the handling of supplies of digital currency and supply of money under the GST is consistent with one another, double taxation of digital currencies is avoided.

Certain low-value items, defined as those with a value of AUD 1,000 or less, acquired by consumers outside of Australia and brought into the country are subject to GST.

Wine Equalisation Tax (WET)

The Federal Government imposes a Wine Excise Tax (WET) at the wholesale level at a rate of 29 percent, in addition to a Goods and Services Tax (GST) of 10 percent, which is calculated on the price including the WET. This tax is applicable to wine made from grapes, fruit and certain vegetables, mead, and sake.

There is no provision for an input tax credit for WET for retailers. Nevertheless, a rebate in the amount of 29 percent of the wholesale price (not including WET or GST) is offered to wine producers for wholesale sales, and a rebate in the amount of 29 percent of the notional wholesale selling price is offered to wine producers for retail sales and applications for own use (up to a maximum rebate of AUD 350,000).

Luxury Car Tax

The luxury car tax is levied by the Federal Government at a rate of 33 percent of the value of the car that exceeds the luxury car tax threshold. This threshold is set at AUD 79,659 [77,565] for fuel-efficient vehicles and AUD 69,152 [68,740] for other vehicles in 2021/22 [2020/21] financial year. The luxury car tax is payable on the value that is exclusive of GST above the threshold. Tax on luxury vehicles cannot be offset by an input tax credit under any circumstances, regardless of whether the vehicle is utilized for personal or professional purposes.


accounting notes

1. By the 30th of June, you should have prepared trust resolutions.

By the 30th of June each year, trustees of discretionary trusts are expected to have drafted and documented resolutions regarding the manner in which trust revenue should be dispersed to beneficiaries for the upcoming fiscal year of 2020–2021.

Imagine that a proper resolution is not carried out by the 30th of June. In that scenario, any beneficiaries named in the deed who are not specified will acquire a current entitlement to trust income and become liable for taxes on that income (even where they do not receive any cash distribution).

Alternately, the trustee will be subject to an assessment at the highest marginal tax rate on any taxable income that has been generated by the trust but has not been dispersed.

A trustee has until the end of the year to produce documentation, such as minutes, file notes, or an exchange of correspondence, demonstrating how an effective settlement was reached. On the other hand, the trust’s accounting does not have to be done by the 30th of June.

Because a corporate trustee may need some time to advise its directors that a meeting must be summoned to pass and record a resolution, a notification of this nature should be distributed well in advance of the date of the deadline, which is June 30.

2. Streaming capital gains and franked dividends

The rules for streaming are complicated, but in general, trustees of discretionary trusts are able to distribute capital gains and franked dividends to multiple beneficiaries if the trust deed permits the trustee to make a beneficiary “specifically entitled” to those amounts. This applies only if the trustee is allowed to make a beneficiary “specifically entitled” to those amounts.

This decision must be memorialized by the trustee prior to the 30th of June, and the beneficiary either receives or has the right to receive an amount that is equivalent to the financial advantage that was realized from the gain or dividend.

3. Prevent deemed dividends

If the same family group controls both the trustee and the company, then any unpaid distribution that is owing by a trust to a private company beneficiary that is related to the trust and that originates on or after July 1, 2016, will be viewed as a loan by the government.

Under these conditions, it is possible that the related trust will be considered to have obtained a presumed dividend for the unpaid trust payout that will occur in the 2020–2021 fiscal year.

However, a deemed dividend may be avoided if the firm’s overdue distribution is paid out or if the company enters into a compliant loan agreement before the company is required to lodge its income tax return for the tax year 2020–2021.

Alternately, if the sum is retained in an appropriate sub-trust structure for the sole benefit of the private firm and other conditions are satisfied, then a deemed dividend will not occur.

4. Reimbursement agreements

Let’s say that an agreement regarding repayment is the source of a beneficiary’s entitlement. In such a scenario, the highest possible marginal tax rate is applied to the beneficiary’s net income, which under normal circumstances would have been subject to assessment by the trustee on the beneficiary’s behalf.

The only exception to this rule is when the agreement is made as part of a routine family or business transaction. Because the recipient is considered legally disabled (for example, a minor), it is imperative that any reimbursement agreements follow the conditions set forth by the law.

Customs Duties

Imports into Australia are normally subject to duties according to the Australian Customs Tariff unless an exception applies in that particular case. The highest possible rate of duty is 5 percent.

At the present time, complete free trade agreements between Australia and Chile, China, Hong Kong, Japan, Indonesia, Korea, Malaysia, New Zealand, Peru, Singapore, Thailand, and the United States are in place.

In addition, there is a Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. This agreement is known as the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA). The ASEAN Member States include Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

A regional comprehensive economic partnership free trade agreement that will enter into force on January 1, 2022, between Australia, New Zealand, and Southeast Asian nations (Brunei Darussalam, Cambodia, China, Japan, Laos, Malaysia, Myanmar, Philippines, Republic of Korea, Singapore, Thailand, and Vietnam), with the goal of progressively removing all barriers to trade in goods, services, and investments. This agreement will be between Australia, New Zealand, and Southeast Asian nations.

A Pacific Agreement on Closer Economic Relations Plus is a regional trade agreement that focuses on the development of nine Pacific island countries, including the Cook Islands, Kiribati, Nauru, Niue, Samoa, and the Solomon Islands. This agreement also applies to Tonga, Tuvalu, and Vanuatu. It was signed by Australia, New Zealand, and the other Pacific island nations.

During discussions for a free trade agreement with the United Kingdom, a general understanding and agreement in principle have been established. In addition to this, discussions are also taking on with both India and the European Union.

Excise Duties

Beer, spirits, and liqueurs, as well as tobacco, cigarettes, and items derived from petroleum, are subject to significant levels of excise duty. The changes in the consumer price index are used to adjust the excise tax rates on tobacco products, alcoholic beverages, and gasoline on a semiannual basis (CPI). The following are some examples of excise rates that are currently in effect:

  • Beer with an alcohol concentration of no more than 3 percent by volume that is sold in individual containers holding no more than 48 liters will cost AUD 45.07 per litre of alcohol if the calculation is based on that alcohol content. The amount of alcohol included in the items is greater than 1.15 percent by volume.
  • Tobacco in stick form with a real tobacco content of no more than 0.8 grams per stick and a price of AUD 1.11905 per stick
  • Petroleum condensate, crude petroleum oil, and diesel: AUD 0.433 per litre.
  • The excise duty rate for liquefied petroleum gas (LPG), other than LPG that is free from the charge, is AUD 0.141 per liter.

A tax credit for the fuel tax (also known as excise tax or customs duty) that is already factored into the price of taxable fuel is provided via a fuel tax credit scheme. In general, credits are offered to businesses that make use of fuel in their operations as well as homes that make use of fuel in the creation of domestic electricity and heating.

Land Tax

A tax that is based on the unimproved capital value of the land is one that is levied by every state and territory with the exception of the Northern Territory. On the other hand, the land that serves as one’s primary place of living and the land that is used for primary production are typically free from land tax.

In addition, a land tax surcharge system exists in many states for owners who are located outside the state or who hold property absentee. In addition, the state of Victoria levies a tax of one percent each year on the capital improved value of specific empty land that is considered to be residentially vacant.

The state of Victoria has a windfall gains tax that is applicable to the increase in value of land in Victoria as a result of a rezoning that takes effect on or after July 1, 2023, subject to certain transitional arrangements. This tax is applicable if the rezoning in question takes place on or after that date.

The tax is computed at a rate of 62.5 percent on the uplift in value that is greater than AUD 100,000 when the taxable value uplift of all land owned by an owner or group as a result of the same rezoning is between AUD 100,000 and AUD 500,000. When the increase in taxable value is greater than AUD 500,000, the tax is computed at a rate of 50% on the entire uplift.

Stamp Duty

Stamp duty is a tax that is levied by all governments and territories, but the amount is variable for each type of transaction. Conveyances of products that are not related to any other property are often exempt from stamp duty in the majority of jurisdictions. This is in contrast to the case with real estate conveyances, which are subject to stamp duty in every jurisdiction.

It varies from state to state whether or not there is a duty imposed on the transfer of shares involving unlisted firms. Corporate reconstruction exemptions are available.

Beginning September 1, 2021, the state government of New South Wales will begin to offer a stamp duty rebate for eligible registered vehicles when purchasing new or used battery-electric and hydrogen fuel cell vehicles with a price tag of up to AUD 78,000 (dutiable value). These vehicles can be either brand new or previously owned.

In situations where significant stamp duty may be imposed, it is recommended that advice from a stamp duty specialist be sought out. This is because the amount of duty that is imposed may vary depending on the nature of the transaction.

Environmental Taxes

Both a tax on carbon emissions and an emissions trading plan are not something that is practiced in Australia. However, the Clean Energy Regulator has the ability to issue Australian Carbon Credit Units (ACCUs) in exchange for greenhouse gas abatement operations that are carried out as part of the Emissions Reduction Fund established by the Australian government. Each ACCU is equal to one tonne of carbon dioxide equivalent net abatement that was achieved through qualified activities, either in the form of reduced emissions or carbon sequestration. ACCUs that have not been cancelled, surrendered, or given up in any other way are eligible for trading.

There is a possibility of trash taxes being implemented in several of Australia’s states and local government agencies. For instance, on July 1, 2021, the state of Victoria implemented a road-user levy that is applicable to all vehicles registered in Victoria that are either zero emission or low emission.

A federal excise duty is levied on a variety of fuels and petroleum products in Australia, and the country also has a fuel tax credit scheme in place.

Discrete tax breaks that are specifically tied to issues of the environment have recently become law. For instance, income from a managed investment trust (MIT) that only holds ‘clean buildings’ are eligible for a concessional WHT rate of 15% if the MIT meets certain requirements (see the Withholding Taxes section for further details).

Fringe Benefits Tax (FBT)

The Federal Government charges the Fringe Benefits Tax (FBT) on employers at the rate of 47 percent of the “grossed-up value” of non-salary and wage fringe benefits that are supplied to employees (and the employee’s colleagues) by the employer or associates of the employee.

The value is rounded up to its full extent in order to maintain tax neutrality between the provision of benefits and the payment of cash compensation. Therefore, for the most part, FBT can be deducted from an individual’s income tax.

Some small advantages of living in remote areas under specific conditions and certain relocating fees can be exempt from the fringe benefits tax. In addition, there are some special valuation criteria, most notably for motor vehicles and some living-away-from-home advantages. These restrictions allow for a reduced value to be assigned to the benefit.

Payroll Tax

finance and accounting concept. business woman working on desk

Payroll taxes are levied on employers by states and territories (broadly defined). The laws governing payroll taxes in each of the different jurisdictions have been standardized. Despite this, there are still certain distinctions, the most notable of which are the tax rates and the criteria for exempting firms whose annual payroll is below a certain level after taking into consideration the laws regarding grouping.

For instance, the rate for the year that concluded on June 30th, 2022 in the state of New South Wales is 4.85 percent, and the yearly exemption barrier is set at 1,200,000 Australian Dollars.

The annual exemption threshold in Victoria is AUD 700,000, and the general rate for the year that ended on June 30 2022, in Victoria is 4.85 percent (with the exception of the rate for regional Victorian companies, which is 1.2125 percent). In the domains of many other states and territories, there is a wide range of rates and thresholds.

Superannuation Guarantee Levy

There are few exceptions to this rule, but generally speaking, a set percentage of an employee’s earnings base must be contributed by the employee’s employer to a registered retirement savings account or a registered superannuation fund on the employee’s behalf by the company.

In the event that these payments are not made, the employer will be held responsible for a superannuation guarantee (SG) charge, which is not tax-deductible.

The present SG percentage will remain at 10 percent until the 30th of June 2022 (the rate was 9.5 percent until the 30th of June 2021), and then it will gradually climb up to 12 percent beginning on the 1st of July 2025.

There is no compulsory contribution to social security levied by any level of the Australian government.

Major Bank Levy

A tax, known as the Major Bank Levy, has been imposed on authorised deposit-taking institutions (ADIs) in Australia whose total liabilities are more than one hundred billion Australian dollars. Certain obligations of the ADI that are reported to the regulator on a quarterly basis in accordance with a reporting standard are subject to the levy at a rate of 0.015 percent, which is the rate at which the levy is applied.

Insurance Tax

Insurance premiums are subject to taxes at the state level, which can be rather significant.

Petroleum Resource Rent Tax (PRRT)

The Petroleum Resources Rent Tax (PRRT) is presently applicable to all petroleum projects in Australian offshore regions (or Commonwealth nearby areas), with the exception of production licenses derived from the Joint Petroleum Development Area in the Timor Sea. Aside from the Joint Petroleum Development Area in the Timor Sea, it applies to any and all oil and gas exploration projects that are conducted offshore in Australia.

A ‘project’ or a ‘production licence area’ is subject to PRRT at a rate of forty percent of the taxable profits resulting from the recovery of all petroleum inside the project, which includes the following items:

  • crude oil
  • shale oil
  • condensate
  • sales gas
  • natural gas
  • LPG, and
  • ethane

The taxable profit of a project is calculated as follows:

Taxable profit = Assessable receipts – Deductible expenditure

Exploration, project development, and operating expenses are all types of expenditures that fall under the umbrella term “deductible.”

The appropriate taxpayer is responsible for performing their PRRT assessment. In the majority of instances, the taxpayer is obligated to provide the Commissioner of Taxation with a PRRT return for each and every PRRT year. In most cases, PRRT must be paid in equal quarterly instalments.

In addition to the standard income tax, PRRT must be paid. Payments to the PRRT, including those made in instalments, can be deducted from your taxable income.

Local Municipal Taxes

A charge for usage is included in local taxes, which are determined by the unimproved capital worth of the land and are collected based on those taxes. Local taxes also include costs for water, sewerage, and drainage (e.g. water usage).

Additional Tips

1. Single Touch Payroll

By the 14th of July in 2021, employers are required to make a finalisation declaration so that employees can obtain their income statements that are ready for tax preparation.

Make sure that the STP information is correct before you commit, and if you require additional time, submit an application to be deferred.

2. Superannuation guarantee

Ensure superannuation guarantee payments for employees are up-to-date. Contributions to employees’ superannuation funds that are made by employers and received by 30 June of the following year by the nominated super funds are eligible for employers to claim as tax deductions.

Notify the ATO of any missing payments, and take the necessary steps to correct them. You are required to lodge a superannuation guarantee charge (SGC) statement and pay the SGC to the ATO if you do not pay the superannuation guarantee of an employee on time and to the appropriate fund.

Regarding overpayments, the ATO has some discretion, albeit it is not a lot of discretion, and it can be used in certain situations.

The SGC does not qualify for a tax deduction, and users will be subject to considerable administrative costs, fees, and penalties. Because of this, it is essential to check that your payments toward the superannuation guarantee are accurate at all times during the year.

3. Taxable payments reporting system

Does your company generate revenue through the provision of services such as building and construction, cleaning, courier, road freight, information technology, security, investigation, or surveillance? If this is the case, you must record any payments made to contractors by the due date of the taxable payments annual report, which is the 30th of August 2021.

The information that you are required to record is typically found on the invoices provided by the contractors. This information includes their ABN, name, address, and the total amounts paid for the fiscal year.

4. GST adjustments

When you file a tax return for your company, your tax agent will frequently do a reconciliation of your GST accounts against the records you provided. This can help detect transactions that have been misclassified as well as unclaimed credits, both of which need to be addressed.

Your upcoming BAS provides an opportunity to rectify a significant number of errors, including those relating to the GST and the fuel tax credit. However, if you are unable to rectify the error in your subsequent BAS, you will be required to submit a revision.

It’s also a chance to check that your accounting software is recording all of your GST transactions appropriately.

Worksheets are available from the ATO that can be used to aid in the calculation of GST adjustments for sales, purchases, bad debts, creditable purposes, and adjustment summaries.

5. Businesses in financial distress

As a result of COVID-19, many firms are either struggling with their cash flow or are in significant financial hardship. As a result, it is essential to establish a financial plan for your company and work toward enhancing its current financial condition.

When deregistering a company, there are certain tax requirements that must be considered, and the ATO offers guidance to firms who are experiencing financial difficulties.

Tax debt relief may be available to individuals who can demonstrate that they are experiencing extreme financial difficulty.

Obtaining sound accounting and legal counsel as soon as possible is absolutely necessary if you believe that your company may be experiencing financial difficulties.

Primary Production

1. Farm management deposits (FMDS)

Utilizing the farm management deposits program is one of the most effective tax planning methods that primary producers have available to them (FMDs). They are an efficient instrument for the planning of both business and cash flow.

Primary producers can deposit up to $800,000 into an FMD account, and they will have early access to the funds in their FMD account if a drought occurs. They could reduce the amount of interest paid by the primary production company on its debt.

2. Income averaging

Through the use of tax averaging, primary producers have the ability to smooth out the fluctuations in their revenue and the amount of tax that they owe over a period of up to five years.

This prevents farmers from having to pay a higher overall tax burden over the course of their careers than other taxpayers with incomes that are equivalent but more consistent.

3. Other primary producer tax concessions

Other tax concessions you may be entitled to as a primary producer include:

  • the uncapped immediate write-off for capital expenditure on water facilities and fencing assets
  • the deduction for the full cost of a fodder storage asset if the expense was incurred or it was first used or installed ready for use on or after 19 August 2018
  • the outright deduction for capital expenditure for land care operations and carbon sink forests
  • the accelerated write-off for horticultural plants and grapevines.
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