There are many types of business taxes that are levied in Australia. Some of these are State based, which means that they may be levied in some States or Territories but not others or how they are calculated differs, while others are Federal, which means that they apply uniformly throughout Australia. Some of the more important business taxes are described below.
Income tax is a Federal tax levied on the taxable income of a business. The taxable income of a business is determined by calculating the business’s income or revenue (not including GST) and deducting any allowable deductions incurred by the business in generating its revenue.
Capital Gains Tax (CGT)
CGT is not a separate tax, it is income tax payable on assessable capital gains. Businesses can generate capital gains (or losses) by selling capital assets, for example, machinery, property or motor vehicles. The sale of these types of assets generally gives rise to a CGT event, which is the taxing point. There are many CGT events in the Australian tax legislation so you may need legal or accounting advice if you are unsure whether CGT applies in your circumstances.
Fringe Benefits Tax (FBT)
FBT is a tax paid by an employer on benefits it pays or gives to its employees or their associates. Common examples include motor vehicles, parking and payment of private (non-work) expenses. It is a separate tax to income tax and has separate record-keeping and reporting requirements for the employer.
Goods and Services Tax (GST)
For more information on GST see our article entitled “What is GST and how does it work?”.
Pay As You Go (PAYG) Withholding
For more information on PAYG withholding see our article entitled “What are the tax responsibilities of small businesses?”.
Payroll tax is a State tax payable on the wages paid by an employer to its employees. Like other taxes, there is a threshold of wages above which an employer’s total wage bill must be in order for payroll tax to be payable. This threshold varies from State to State.
Stamp duty is a State tax payable by a purchaser on a number of types of transactions, including the purchase of real estate, shares and businesses; motor vehicles; leases and mortgages; and insurance policies. The amount of the tax, thresholds and transactions to which it applies varies from State to State.
Land tax is a State tax payable by certain real estate owners (including businesses) on the value of land owned by them each year. The value of the land for land tax purposes does not include the value of any improvements on the land, for example buildings. Although land tax is State based, the laws are similar across Australia. However, there is no land tax payable on land in the Northern Territory.
Small Business Tax Concessions
There are tax concessions available to small businesses in relation to a number of the business taxes referred to above. To be eligible for such concessions a business must have an aggregate turnover (i.e. revenue) of less than $2 million in each year where the concession is to apply. There are a number of benefits to a business that qualifies for small business tax concessions. These include tax exemptions (CGT retirement and 15-year small business exemptions), tax discounts (CGT 50% active asset reduction), roll-over relief (if you buy replacement assets), favourable deduction and depreciation rules. These concessions can be quite valuable to small businesses so should be properly investigated or advice sought to maximise your business’s use of such concessions.
Stay up to date with your tax responsibilities. Give LegalVision a call today to get expert legal advice. If you’re in need of tax advice, however, it might be better speaking with your accountant.