A number of Federal and State taxes and duties apply to businesses of all types, including small businesses. This article focuses on other tax responsibilities of small businesses including record keeping obligations, reporting obligations, PAYG withholding, superannuation and paying tax.
Every business taxpayer must keep records of all business transactions.
The Australian tax system is a self-assessment system, which requires each taxpayer to determine their income and expenses. It is therefore each taxpayer’s obligation to ensure that adequate records are kept of all business transactions so that the taxpayer can substantiate the income earned and expenses incurred in earning that income.
Records can be kept in hard copy or electronically.
Based on the records it keeps, a business taxpayer must report to the ATO its income and expenses in relation to a range of taxes, including GST, PAYG withholding, FBT and income tax by lodging business activity statements (BAS).
BAS are generally required to be lodged periodically (currently quarterly for most taxpayers, although changes to the law have been foreshadowed that will increase the frequency of reporting to monthly), although for some taxpayers lodgement is only required annually.
BAS can be lodged in hard copy or electronically by the due date specified on the BAS and, where required, must be accompanied by payment.
All businesses must comply with their PAYG withholding obligations, particularly if they employ staff. This means that employers must deduct from salary/wages payments of their employees a specified amount on account of the tax payable by the employee on those salary/wages payments (i.e. the employee’s income). However, businesses must register with the ATO before withholding amounts from employees.
Businesses may also be required to withhold an amount from payments made to other businesses in circumstances where the business to which payment must be made does not quote an ABN on their tax invoice, or quotes an incorrect ABN.
If your business employs staff then you must make superannuation contributions on behalf of employees covered by the superannuation guarantee legislation, which includes most full-time, part-time and casual workers in Australia.
At present, mandatory superannuation contributions must be made quarterly at a rate of 9% of an employee’s base salary, although there is a maximum salary threshold (exceeding approximately $190,000) over which mandatory contributions do not have to be made, and the Federal government has announced that the 9% rate will be increased over time.
If you are a small business owner, there are a number of payment options available to you to enable you to pay your business tax. Payments can generally be made in person (for example, at a post office), by mail (by sending payment to the ATO’s nominated address listed in correspondence sent to you) or by electronic payments (for example, by direct credit or debit, online or by BPay).
The ATO encourages business owners to register with the ATO and obtain a digital certificate, which provides online access to enable businesses to meet their reporting and payment obligations.
Need help with your taxes? Contact Nobel Thomas today.