Australian Taxation Office (ATO): The Australian Taxation Office is the main government body that governs and enforces Australian taxation laws and regulations. All tax reporting and payments are to be lodged with the ATO
Business Activity Statements (BAS): BAS is a tax reporting requirement usually issued on a quarterly basis. It is the way businesses report their income and expenses for a range of taxes. The ATO will automatically send the business a BAS when it is time to lodge, and it is important that the business lodges it by the due date stated on the BAS.
Capital Gains Tax (CGT): CGT is income tax payable on assessable capital gains. There are various activities that will constitute a CGT “event” that will trigger CGT. For example, businesses can make a capital gain or loss if disposing of a business asset including goodwill, licenses and business premises. There are CGT concessions for small businesses that will allow a business to reduce its capital gain. The ATO has set out the eligibility criteria for small businesses to get the concession. See also “small business tax concessions”.
Employee Share Scheme (ESS): ESS will give employees a benefit, generally either shares in their employers’ company at a discounted price or the option to buy company shares in the future. Various types of ESS determine the tax treatment, which can be either non-concessional or concessional. Employees in an ESS can get tax concessions. For example, the employee can defer tax until they exercise the share option and have up to 15 years to defer their tax liability. Eligible employers that provide ESS to their employees must meet specific ESS obligations, which depends on when the employee obtains the ESS interests.
False or misleading statements: Records must be kept as accurately and as completely as possible. Any attempt to record and report false or misleading statements regarding income to avoid tax obligations can lead to penalties and, in extreme cases, prosecution by the ATO. See also “Record Keeping”.
Fringe Benefits Tax (FBT): The FBT is tax paid by an employer on any benefits it gives to its employees. This usually refers to cars, car parking and other private expenses. The benefit may be in addition to or a part of the employees’ salary package. This tax is separate to other taxes, and business must separately register for FBT.
Goods and Services Tax (GST): GST is a tax added to most goods and services sales in Australia. It is currently set at 10% on top of the final value. All businesses with an annual turnover of $75,000 must register for GST. If a business is non-profit, the turnover mark is $150,000 or more.
Income Tax: This is the amount levied on the assessable income of business. Assessable income is determined by taking the business’s income and deducting allowable expenses. Any net capital gains must also be included in the assessable income of the business and as such income tax also includes CGT. See also “Capital Gains Tax”.
Land Tax: If a business owns land, most States/Territories have implemented a land tax on the value of land owned by them each year. These taxes are State-based, and it should be noted that there is no land tax payable on land in the Northern Territory.
PAYG Withholding: If a business employs staff, this is an important requirement for it to comply with. This essentially means that a certain amount must be deducted from the salary or wages of their employees when they are paid to fulfil tax obligations.
Note that PAYG Withholding may also be relevant for when businesses make payments to other businesses where the other business does not have an ABN.
Payroll Tax: This is a State/Territory tax calculated on salary or wages paid, or payable, by employers. This includes:
- Director’s fees
- Grossed-up value of fringe benefits
There is a threshold to be met before a business must pay payroll tax, and this varies in each State/Territory.
Record Keeping: Businesses have a responsibility to keep a record of all their transactions to determine their income and expenses for when it is time to report and pay taxes. Most businesses now do this electronically as it is faster and more efficient. Businesses have a legal responsibility not to make false or misleading statements to the ATO.
Reporting: Tax reporting is crucial and mandatory for businesses of all types. A business must report to the ATO income and expenses for the multitude of taxes that it is required to pay, usually by lodging BAS. Reporting is largely based on efficient and organised record keeping. See also “Business Activity Statements”.
Research & Development (R&D): R&D is an area that the Government provides tax incentives with which to encourage companies to participate in more research that will benefit Australia. The R&D tax incentive offers two different tax offsets that depend on the aggregated turnover of the company. Companies must meet the Government’s criteria and be approved before they can claim this tax incentive.
Small business tax concessions: There is some tax concession available for small businesses. The ATO has defined small business to meet one of the following:
- Aggregated turnover for the previous year was less than $2 million;
- Actual aggregated turnover for the current year is less than $2 million;
- Estimated aggregated turnover for the current year is less than $2 million plus aggregated turnover for previous two years was less than $2 million.
- Tax concessions can include exemptions, discounts and rollover relief.
Stamp duty: This is a State/Territory tax payable on certain business transactions and varies from State to State. Note that in NSW, the duty on the transfer of business assets or a declaration of trust over business assets will be abolished from 1 July 2016 (with the exception of land).
Superannuation: If a business employs staff then it has the legal obligation to make superannuation contributions on behalf of their employees. This can cover full-time, part-time and casual workers. At the moment, if a business pays an employee $450 or more before tax in a calendar month, it must also contribute to super at the minimum rate of 9.5% of an employee’s ordinary time earnings.
Questions? Contact LegalVision’s business lawyers on 1300 544 755.