Your guide to the basics of business taxes

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Depending on the structure of your business, the way in which you pay taxes may be different to the next. We explain some of the basics to be aware of
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Business tax basics explained by an accountant

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Depending on the structure of your business, the way in which you pay taxes may be different to the next, particularly when starting or changing a business. These days, navigating your way through each tax type can at times be confusing or overwhelming while the ATO gets more and more strict all the time with the implementation of tax laws. This is one of the primary reasons for engaging a tax accountant like Fitzpatrick & Robinson

There are many taxes your business might be affected by, though the main ones are;

  • Goods and services tax (GST)
  • Income tax
  • Pay as you go withholding tax for employees (PAYG)
  • Payroll tax
  • Excise tax
 

Then there are others like; 

  • Fringe benefits
  • Capital gains
  • Property tax
  • Vehicle tax
  • Other duties and levies administered by state or local governments. 
 

At Fitzpatrick & Robinson we are an accounting firm that provides clear and concise financial advice or information to help small-medium size businesses in Gregory Hills, Camden, Narellan & the greater Macarthur area. Our experienced accountant team can demystify and plan for the relevant taxes you’ll need to pay in your business as well as identify the concessions you may be eligible for. 

Here is a guide to some of the basic tax requirements that we help business owners manage on a daily basis. 

Business activity statement (BAS) taxes

When you register for an ABN and GST, the ATO will automatically send you a BAS when it is time to lodge. On this statement, several taxes are reported and paid as part of the monthly or quarterly activity statement:

      • GST – This is a broad-base tax of 10% on most goods and services. This is collected from customers and paid to suppliers, and you pay the difference between GST on sales and purchases.

      • PAYG Withholding – As an employer, your role in helping your payees meet their end-of-year tax liabilities is by collecting pay as you go (PAYG) withholding amounts from payments you make to employees or suppliers that don’t provide an Australian Business Number.

      • PAYG Instalments – These are regular prepayments of the tax on your business and investment income and contribute towards an expected income tax bill.

      • Other less common taxes (if applicable) are – Fringe Benefits installments, fuel tax credits, wine equalisation tax and luxury car tax.

     

    Fees and other taxes paid to the state revenue offices

    Some business taxes are paid directly to the state revenue office, such as land tax for property purchases and payroll tax once the state threshold of reportable wages is reached. Other common government duties include stamp duty on property transfers or land tax.

     

    Income tax for businesses

    Income tax for business is calculated differently according to the type of entity, and is calculated after the end of the financial year, taking into account any PAYG instalments already paid. It’s important to note that tax deductions for business expenses reduce your taxable income and, therefore, your tax bill. However if financial gain is made on the disposal of assets, such as property or shares, capital gains tax is paid on the amount of financial gain. This is paid as part of income tax. 

    By partnering with a qualified and experienced business advisor and tax accountant like any one of the team at Fitzpatrick & Robinson, we can assist you in wading through the financial numbers. Using a tax accountant can be beneficial for businesses seeking to maximise their tax concessions from the Australian Taxation Office (ATO). Tax accountants are professionals who specialise in tax laws and regulations and can provide valuable expertise and guidance, you benefit from

    • Knowledge and Expertise: Tax accountants have in-depth knowledge of the complex and ever-changing tax laws and regulations. They stay updated with the latest changes and understand how these regulations apply to different business scenarios. Their expertise allows them to identify opportunities for tax concessions and ensure compliance with relevant tax laws.
     
    • Deductions and Concessions: Tax accountants can help identify eligible deductions and concessions specific to your business, which you might overlook on your own. They can assess your financial records, expenses, and transactions to determine the deductions you are entitled to claim. Maximising deductions can help reduce your tax liability and increase potential tax concessions.
     
    • Compliance and Risk Management: The ATO has stringent guidelines regarding tax compliance, and failure to adhere to these regulations can result in penalties or audits. Tax accountants can help ensure your business meets all compliance requirements, reducing the risk of penalties. They can also assist in preparing accurate and timely tax returns, minimising the chance of errors that could trigger an audit.
     
    • Tax Planning: Tax accountants can provide strategic tax planning to optimise your business’s tax position. They can analyse your financial situation and recommend appropriate strategies to minimise tax liabilities. By considering factors such as business structure, timing of income and expenses, and investment decisions, they can help you make informed choices that align with your long-term goals.
     
    • Audit Support: In the event of an ATO audit or review, having a tax accountant on your side can be invaluable. We can assist in preparing the necessary documentation and represent your interests during the process, ensuring you have the best chance of a favourable outcome. Most of the time the process is straight forward as the ATO just needs clarification on the information that has been submitted to them, in other situations it may be a deeper audit that is required.
     

    While hiring a tax accountant can provide significant benefits, it’s essential to choose a reputable and experienced professional. Look for accountants who specialise in tax and have a track record of working with businesses similar to yours. Consider seeking recommendations or conducting thorough research before making a decision. Who you choose will ultimately depend on the complexity of your business’s tax situation, your level of comfort with tax laws, and your available resources. Consulting with a tax accountant can help you navigate the intricacies of the tax system and potentially optimise your tax concessions from the ATO.

    Tax concessions for small business

    If you’re considered a small business, our professional team of business accountants at Fitzpatrick & Robinson can ensure you are claiming all the tax benefits you are allowed through the ATO Concessions that will reduce the amount of tax liability. For example, there are specific concessions for asset write-off, primary producers, fringe benefits or start-up expenses. Concessions also apply in some situations to reduce the amount of capital gains tax payable, hence the importance of having a professional on your side to make sure you’re getting what you’re entitled to.

    At the moment the biggest tax concessions that most small businesses can take advantage of are;

     

    Interaction of tax depreciation incentives where eligible business entities may be looking at various tax depreciation incentives. Only one incentive can apply for an asset and there is a choice of;:

      1. Temporary full expensing
      2. Instant asset write-off
      3. Backing business investment
      4. General depreciation rules

     

    For a snapshot to help you work out how these incentives may apply to you, see the ATO’s Interaction of the tax depreciation incentives information.

     

    Temporary full expensing where eligible businesses with an aggregated turnover of less than $5 billion can deduct the business portion of the cost of eligible new depreciating assets. These assets must be first held and first used, or installed ready for use for a taxable purpose, between 7.30pm (AEDT) on 6 October 2020 until 30 June 2023. For small and medium sized businesses (aggregated turnover of less than $50 million), temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.

    This can help situations where new equipment is needed to replace old items or to improve outputs created by the business.

     

    Instant asset write-off has been a relatively new concession, but there have been changes to the way this is applied. From 12 March 2020, the instant asset write-off works when:


      • The threshold amount for each asset is $150,000 (up from $30,000)
      • allows businesses until 30 June 2021 to first use or install the asset ready for use, provided the asset is purchased by 31 December 2020
      • the businesses has an aggregated turnover of less than $500 million (up from $50 million) 
     
    There are many other concessions available and these will change each financial year in terms of the eligibility criteria or how they can be applied. Our accountants can provide the right advice to manage these in a way that is suitable for your business.

     

    Getting business related tax advice

    Whether you own an existing business or are considering buying or starting one, there is much to consider when it comes to sorting out the potential tax implications. With the support and guidance of a professional advisory and accounting team, the process can be made smooth, less confronting while also reducing your tax liabilities at the same time. In the Campbelltown McArthur region of Sydney there are several avenues where business owners can seek the right tax-related advice and guidance which include;

    1. Certified Practising Accountants (CPAs): These professionals have expertise in accounting and tax matters. They can provide valuable tax advice and guidance tailored to your business needs. Look for CPAs (like our one) who specialise in taxation and have experience working with businesses. You can find them through professional accounting bodies like CPA Australia.

    2. Tax Consulting Firms: There are specialised tax consulting firms in Sydney that focus on providing tax-related services to businesses. These firms often have teams of tax professionals who specialise in various aspects of taxation. They can offer comprehensive advice, tax planning, and strategic guidance based on your specific business requirements. 

    3. Small Business Advisory Services: Various organisations and government bodies in Sydney offer advisory services specifically tailored to small businesses. These services can include tax advice and guidance, especially related to compliance, deductions, and concessions. Examples of such organisations include local business chambers who may provide workshops, seminars, or one-on-one consultations with advisors who can assist with tax-related queries. Fitzpatrick and Robinson also offers a business advisory service which can be included with bookkeeping and accounting services so that you have a holistic support mechanism to help grow your business.

    4. Business and Tax Forums/Networks: Participating in business and tax forums or networks can be beneficial for accessing advice and guidance. These forums often consist of business owners, tax professionals, and industry experts who share their knowledge and experiences. Networking with fellow business owners or attending tax-related events can help you gather insights and connect with professionals who can provide guidance specific to your situation. The downside though might be getting advice or using some that hasn’t come from someone with the right qualifications.

    5. Australian Taxation Office (ATO): The ATO itself provides various resources and assistance to business owners. They offer online guides, webinars, and information sessions on tax-related matters. The ATO website (www.ato.gov.au) provides comprehensive information on tax obligations, deductions, concessions, and compliance requirements. You can also contact the ATO directly for specific queries or seek clarification on certain tax matters. What you will discover though is a lot of this information is quite complex, the benefit of engaging with a local accountant is that we can decipher their information to present it in simple to understand terms for any business owner.

    When seeking tax advice and guidance, consider the complexity of your business’s tax situation and your specific needs. It’s important to choose professionals or resources that align with your requirements and have a good reputation in the industry. Conduct thorough research, seek recommendations, and consider consulting multiple sources to ensure you receive accurate and reliable advice for your business. Operating your business with the help of either a bookkeeper, accountant or a CPA can mean the difference between growing & thriving or paying too much tax each year

    Rick & Bryn
    Rick & Bryn

    Experienced accountants who love helping other business owners in Sydney to maximise profits, improve cash flow & grow their business.

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    At Fitzpatrick and Robinson our purpose and reason for being is to help business owners make more money, pay less tax while growing in a sustainable & methodical way. We have a team of bookkeepers, accountants, tax accountants for business, a CPA, Xero accountant specialists while also providing business advisory services.

    Want an accountant that can answer all your common questions like where or how to code an expense through to setting up a self managed super fund or anything in between.