As a medium-sized business, you are likely to be implementing growth strategies to reach a new market, starting selling new products, or expanded your business to new premises. This growth may mean that your tax obligations have changed. Below, we set out the key tax obligations your business should be aware of and what potential tax changes you may face as your business grows.
Tax Recording and Reporting
Every business must keep a record of their business transactions to accurately calculate the amount of tax they need to pay. In general, the basic tax obligations that medium businesses will have include Goods and Services Tax (GST), Fringe Benefits Tax (FBT), Income Tax, Capital Gains Tax (CGT) and Pay As You Go (PAYG) Withholding.
The growth of your business may mean that you have expanded to other states, in which case it is important to review the tax obligations each of the states that your business operates in. For example, payroll tax, land tax and stamp duty will all vary from state to state.
Note that here are also tax concessions that your medium business may no longer be eligible for, which is addressed below.
Possible New Tax Obligations
As your business expands, there may be new tax obligations that you should be aware of. If your business has expanded to doing business overseas, you should check your obligations for international tax, which applies to Australian businesses that are earning foreign income. In general, as an Australian resident, you must report all overseas income. Tax treatment will then depend on the country in which your activities are carried out in and whether or not it is a listed country.
Additionally, you may have acquired more employees or are planning on doing so, in which case it is important to note your obligations for PAYG withholding as well as payroll tax. This applies to all employees and potentially for contractors as well if there is an agreement between you to withhold the amount.
Tax Concession Changes
The ATO permits tax concessions to small businesses, which applies across the range of business structures including sole traders, partnerships and companies. To qualify for these concessions, your business must be considered a ‘small business entity’, which is essentially an aggregated turnover of less than $2 million. It is necessary that you review whether your business still qualifies for the small business concession every financial year.
There are other possible tax concessions that you may be eligible for even if your business is no longer considered a small business, including CGT concessions and fringe, benefits tax FBT concessions. For example, if your total gross income was less than $10 million, you will be exempt from paying car parking benefits, provided parking is not provided in a commercial car park.
Medium businesses should also note the expected upcoming tax cuts announced in the 2016 Budget speech. These changes will reduce the company tax rate of companies with a less than $10 million turnover to 27% instead of 30%, and additionally raise the discount for unincorporated businesses with less than $5 million turnover to 8% on personal income tax.
Your medium business may have different tax obligations to a small business depending on your revenue and the location in which you do your business, which will likely change as your business grows. It is important to review constantly any new tax changes that the Government announces and to ensure you are keeping records of your business transactions for tax purposes.