How To Register For Business Taxes
As a budding or existing entrepreneur in Australia, knowing how to register for the right business taxes is crucial if you want to keep the ATO happy.
While we are considered to be fortunate enough to have access to world class healthcare, quality education and a wide variety of top notch community facilities and infrastructure here in Australia - it’s our taxation system that pays for it, and everyone is expected to contribute.
In order to avoid the wrath of the Australian Tax Office, it’s crucial for all businesses big and small to first identify their tax obligations, and then in turn pay accordingly. Failure to do so could expose yourself, brand or business to hefty fines and even jail time - so what do you need to know?
Types Of Business Taxes In Australia
While there is an array of business taxes in Australia that both new and existing entities should be familiar with, these often vary depending on the nature of your brand, your industry, and how much income you generate.
If you’re working for an Australian business as an employee, navigating the taxation system is pretty simple - your boss withholds an amount from your gross pay each week for tax purposes, you get the balance. From there, all you need to do is lodge a tax return every financial year.
For businesses, many are required to actually register for business taxes - there’s nobody on hand to do it for you. Thankfully, the process is quite simple providing you know the ins and outs of your individual brand or business.
Tax File Number - A tax file number (TFN) is your personal reference number in the tax and superannuation systems, and every working Australian needs one - and should have one already at hand. If you plan on running your business as a sole trader, you can keep your individual TFN. However, if you're operating as a partnership, company or trust, you'll need to register a separate TFN for the business.
Australian Business Number - While holding a valid ABN isn’t a legal requirement, any business that you trade with may withhold 46.5% (the top marginal tax rate) of their payments to you, and instead pay this amount directly to the ATO. Needless to say, knowing how to register for an ABN can be a gamechanger when it comes to the overall profitability of your new or existing brand, and it’s important to have one to in order to register for other business taxes.
Australian Company Number - If your business structure is set up as a company, then it’s mandatory to register for an ACN, or Australian Company Number, via the Australian Securities & Investments Commission (ASIC). You'll need to apply for your ACN before getting an ABN. As the business tax obligations and other legalities for companies are different to sole traders and partnerships, this registration is a non-negotiable.
Goods And Services Tax - GST, or Goods and Services Tax, is compulsory if your business or enterprise has a GST turnover of $75,000 or more, or your non-profit organisation has a GST turnover of $150,000 or more. Also exceptions to this rule apply, GST applies to most retail sales to Australian consumers. Registering for GST also enables businesses to claim GST credits when applicable.
PAYG Withholding - Pay As You Go (PAYG) Withholding is a program of pre-paying tax instalments towards your expected tax liability on your business and investment income. Businesses are required to register for PAYG if in their last tax return, they reported gross business and/or investment income (excluding any net capital gains) of $4,000 or more, or their adjusted balance of assessment on your last assessed tax return was more than $1,000.
Payroll Tax - Once your brand or business starts exceeding $25, 000 per week in staff wages paid, or $1.3 million annually, you need to register for payroll tax. As it’s a state based tax, the exact laws and legislation vary depending on the state or territory that your business is trading in. Some companies are eligible for deductions, concessions and exemptions, with regional employers being eligible for a 1% discount on the rate.
Fringe Benefits Tax - Fringe benefits tax is paid by employers on certain benefits that they provide to their employees, employee’s families, or any other associates. Even if the benefit is provided by a third party under an arrangement with the employer, FBT still applies. Be sure to register for FBT tax to avoid penalties, as it can include a wide variety of items like issuing a work car for private purposes, free recreational event tickets, and even discount staff loans.
While there are many other business taxes that may apply to your brand or entity, the above factors are the common ones that require some form of proactive registration. If you’re not sure about your legal or tax obligations as an entrepreneur trading in Australia, it’s always wise to speak to the professionals to avoid landing yourself in hot water.
Sourcing Help With How To Register For Business Taxes
Whether you’re starting a business, purchasing an existing one, or even re-evaluating where your current enterprise stands - all require some form of financial know-how if you hope to successfully navigate your legal tax requirements as well as hitting your financial and business goals.
However, if understanding the legalities that surround your business or finances isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant in order to free up their time while knowing that their financial obligations are already taken care of by the professionals.
Ultimately, the team at Muro believe that every business owner is an entrepreneur. However, accounting does not discriminate - finances break down barriers and are not territorial. If you would like to take a deeper look into your finances, please get in touch with us at Muro today to ensure that you’re on the right path for success.