Business and Australian Tax Advice

A lot of people are confused about the Australian Tax system and don't know how to go about paying their taxes. They need assistance with understanding what needs to be paid when it needs to be paid by, and how much they should pay.

The Australian Tax System is a complex system that requires an expert in this field. That's why at Silverback Accountants, we have experts who can guide you through the process of paying your taxes in Australia.

We make sure that our clients are compliant with all regulations set out by the ATO, so there will never be any penalties for late payments or delayed lodgements again!

This blog post is for anyone who is starting a business and needs some advice on how to navigate the Australian Tax system.  It will give you an overview of what taxes are imposed by the government, as well as ways in which you can minimise your tax liability.

The article also includes information about deductions that may be applicable to your situation, such as the depreciation of machinery and equipment or travel expenses incurred while undertaking work-related activities.

Australian Small Business Tax Guide

It is not difficult to comprehend the rationale behind the assertion that the sector of small businesses represents the "engine room" of the economy and the "largest employer in the country." A recent study that was carried out by the Council of Small Business Organisations of Australia (COSBOA) revealed that small firms were responsible for the creation of 5.1 million jobs, which is approximately half of all employment in the private sector.

There are over three million small enterprises in Australia, including main production concerns, according to the Australian Tax Office (ATO), which accounts for around 96% of all firms.

What Exactly Constitutes a Small Business?

With the exception of the small business CGT exemptions, where the threshold is just $2 million, a small business is typically thought of from a tax viewpoint as one with an annual turnover of less than $10 million.

The law mandates that turnover must be calculated from the "aggregated" amounts, which essentially means annual turnover (gross income, excluding GST) of every "connected" or "affiliated" business. This is done to prevent businesses from splitting activities so they can fall under the $10 million threshold and access various tax concessions.

Taxes And Small Businesses

The fact that the government provides tax breaks to the small business sector for a variety of different reasons is evidence of the significance of the small business sector.

Provisional Full Expensing

In an effort to help businesses weather the COVID-related storm that will hit in 2020, the government has enacted a substantial package of tax reliefs that will allow enterprises to invest in new capital assets in a manner that minimises their tax liability.

The tax break, which is known as "temporary full expensing" (or TFE for short), enables businesses to deduct the full cost of eligible capital assets from their profit for the year rather than depreciating the cost over the course of several years. This is in contrast to the traditional method of depreciating the cost over the course of several years. The new regulation will go into effect on October 6th, 2020.

The new measures could (with some very substantial limitations) represent a significant potential to enhance your business this year, particularly for smaller enterprises. However, these opportunities come with certain restrictions.

The whole purchase price of any and all capital acquisitions can now be promptly deducted by businesses. This includes the following types of purchases:

• A shop or café's fixtures and fittings, for example, are examples of fit-outs
• Technology, including mobile devices, desktops, point-of-sale terminals, and surveillance and alarm systems
• Plant, machinery, and equipment
• Office equipment
• The majority of automobiles, including utes, delivery vans, and cars costing less than $59,136
• Motorbikes
• Solar systems

Businesses must demonstrate that their total yearly sales are less than $5 billion for them to be considered eligible. When discussing "aggregated" turnover, it is important to note that it is necessary to include the turnover of any and all parent companies, even those based overseas.

In addition, companies that have a total turnover of more than $5 billion but a total income in Australia of less than $5 billion are also eligible for the tax reduction, provided that they had previously spent more than $100 million in the fiscal years 2016–17 through 2018–19. This indicates that large multinational corporations, the likes of which typically have a global turnover of more than $5 billion, still have a chance to benefit.

Because the requirement for annual turnover is so high, virtually all companies operating in Australia are eligible to participate in the programme.

TFE applies to newly purchased depreciable assets as well as the costs of making changes to previously qualified assets (even if the existing assets were acquired before the scheme started).

Small and medium-sized firms (those with an aggregated annual turnover of less than $50 million) are eligible to deduct the full purchase price of used assets from their operating expenses. However, used assets are not considered for inclusion in the calculation for companies with a yearly revenue of at least $50 million.

The following are the primary types of assets that do not qualify for the complete write-off of their costs:

• "Expensive" automobiles are those with a price tag that is greater than $59,136
• Structures and other assets that are qualified for deductions under the capital works category
• Assets located in other countries
• Some main production assets (such fencing and water facilities, for example) already have an established rapid write-off programme in place
• A company's resources that aren't being put to good use.

The cost of so-called luxury automobiles can be depreciated up to a limit of $59,136 (excluding GST), but anything that costs more than that cannot be depreciated at all. This rule, which has been in effect for a considerable length of time in relation to the depreciation of cars, has been transferred to TFE. The purpose of the law, in a nutshell, is to prohibit firms from omitting second-hand assets in order to spend the money they save on expensive luxury cars at the expense of the taxpayer.

The limit for expensive cars does not apply to motorcycles or other types of motor vehicles that aren't considered to be cars for the purposes of taxation. This essentially means that commercial vehicles like vans, buses, and trucks can have their entire cost completely written off, regardless of how much they cost. The fact that some of the larger utility vehicles are also considered to be business vehicles rather than cars is a very important consideration (for example, for tradespeople).

Consider for a moment that the utility vehicle has a load capacity of more than one tonne (the dealer or manufacturer should be able to confirm this). In that scenario, we do not count that towards the car limit because we do not consider it to be a car. This is a potential opportunity to buy the vehicle and write off the entire cost, as some of the larger and more expensive utes actually cost more than $59,136.

Take note that the last exclusion excludes TFE claims for capital assets used in a non-business capacity, such as assets purchased by investment property owners or assets utilised in your job. This is the case because the exclusion applies to assets used in a non-business capacity.

If you utilise the asset for both business and personal reasons, you are required to proportionately reduce any TFE deductions you claim. For instance, if you buy a new computer for $2,500 and utilise it equally split between your personal and professional lives, the maximum amount of the purchase that you may deduct from your taxes is $1,250.

Trading Stock

The Tax Act has a set of simplified trading stock regulations, according to which you are permitted to include the same stock value at year's end as you did at the beginning of the year if the value of your trading stock did not change during the course of the tax year by more than $5,000.

Pre-paid Expenses

When certain pre-paid business expenses are made by a small firm before the end of the fiscal year, the owner may be eligible for an instant tax deduction for the amount. Take, for instance, the scenario in which a payment paid an expense that has been carried over into the new fiscal year (such as insurance premiums, rent or membership of a trade or professional body). In that instance, you are eligible to make a claim for the deduction during the previous fiscal year. Check all of your payments that were made between 1 July and 30 June to see if any of them qualify.

GST for Beginners in Australia

Taking care of your responsibilities with regard to the Goods and Services Tax (GST) can also be made easier thanks to the fact that qualifying firms are only needed to account for GST once they have received payment for it. You also have the option to pay the GST in instalments, and the ATO will figure out the total amount of those payments on your behalf. If a small business decides to use part of the things it purchases for its own personal use, it has the option of claiming the full GST credits and then making a single adjustment at the end of the tax year to account for the percentage of private use.

In addition, small firms can take advantage of pay-as-you-go tax instalments, which enable them to pay their taxes on a quarterly basis in accordance with a formula that is derived from their most recent tax return assessment. You won't need to go through the trouble of performing calculations in "long form" because the income reported has been updated to reflect the most recent rise in gross domestic product. This will save you time.

Do I Have To Register My Business For GST?

If the yearly revenue of your company is more than $75,000, you will be required to register for the Goods and Services Tax. In the event that it is lower than that, you have the option of registering or not.

You are required to register for GST once your annual revenue reaches $75,000 or it is likely that it will exceed this threshold in the near future. Once you have reached the required level of annual revenue, you have twenty-one days to complete the registration process.

No of how much money they make, drivers for ride-sharing services and taxis are required to both register for the GST and charge it. In contrast, not-for-profit organisations are exempt from the obligation to register if their annual revenue does not exceed the threshold of $150,000.

On the website of the Australian Business Register (ABR), you may submit an application for an ABN as well as an online registration for GST (www.abr.gov.au). You can also register for GST by using the Business Portal on the ATO website, or you can get assistance from H&R Block with the registration process.

The Australian Business Register (ABR) is the primary repository for all business-related information in Australia. In addition to obtaining an Australian business number (ABN) and registering for the goods and services tax (GST), you also have the option of obtaining a business tax file number (TFN), applying for pay-as-you-go (PAYG) withholding, and registering your business name.

What Is The GST Process?

At this time, the rate of the GST is 10%. This means that if the price of your goods or services is $100, the consumer will be charged $110 for them. The additional ten dollars represent the value-added tax (GST) that has to be paid to the ATO.

When you acquire supplies for your company, you will be charged a Goods and Services Tax (GST) fee of ten percent; nevertheless, this GST fee is creditable to your company. At the end of each GST period – which is typically quarterly but can occasionally be monthly – you are required to account for the GST you've collected on your sales minus any that you've paid (the credits) on your purchases. This must be done by subtracting the amount of GST you've paid on your purchases from the GST you've collected on your sales.

The amount that must be paid is the difference (or refundable if credits on purchases exceed debits on sales). You can accomplish this by filling out a business activity statement and making a payment to the ATO for the nett GST amount.

The Goods and Services Tax (GST) gives businesses with annual revenue of less than $75,000 the option to register for the tax. If a company is spending a significant amount of money on supplies, that company may consider submitting a claim for the GST credits. This is especially the case if the amount of GST credits on purchases is more than the amount of GST that was charged to customers.

Reporting on the GST

To submit all of your quarterly business tax requirements and entitlements, you will need to use something called a business activity statement, or BAS. On your BAS, for instance, you are required to report the total amount of GST that was charged on your sales as well as the credits that you received for the GST that you paid on your business purchases. Additionally, you must report the amount of pay as you go (PAYG) instalments as well as PAYG withholding tax.

Businesses who make more than $20 million in revenue each year are the only ones that are required to submit a BAS on a monthly basis; however, other businesses are free to do so if they so want (for instance, if there are cash flow advantages to your business). If not, the BAS forms have to be turned in every three months.

You are required to submit your quarterly BAS return no later than the 28th day of the month after the end of each financial quarter (September, December, March, June). If you want to lodge your return monthly, you have until the 21st day after the end of each month to submit your BAS.

Keeping track of GST

When you make a taxable sale of more than $82.50 (including GST), your GST registered clients are required to be sent a tax invoice in order for them to be able to claim the GST credit. This is because without the tax invoice, they will not be able to claim the credit. In the event that they request one and you do not supply it at the time, you have up to 28 days from the day that they made the request to provide it to them.

Invoices are required to present certain information to customers. For sales of $1,000 or more, invoices are required to provide the following information:

• phrases such as "tax invoice"
• the name of the seller and their ABN
• date that appears on the invoice
• buyer name and address or ABN if they have one
• a list of the things that were purchased, together with the quantity and the price
• the amount of GST or that the total amount includes GST. the GST amount.

Invoices for amounts less than $1,000 are required to include the aforementioned items, with the exception of the details of the buyer.

The cash basis and the accruals basis are the two approaches that can be taken when accounting for GST.

Companies with annual sales of less than two million dollars have the option of using one of the two methods. The accrual method is obligatory for use in other types of businesses.

If you use the cash method of accounting, you have to record your sales and purchases in the same period that you get payment for your sales or make payments for your purchases if you use the cash basis. The reporting of GST via this technique has the advantage of being more matched with cash flow, which is something that can be beneficial for smaller enterprises.

If you use the accruals basis of accounting, you need to record your sales and purchases during the same time period that you send out sales invoices and receive purchase invoices, respectively.

Deductions For GST And Income Taxes

If you are eligible to take a deduction on your taxes for something that you have purchased for your company, the most you can deduct is the nett value of the purchase (without the GST). This is done so that you do not end up claiming tax relief on the same amount twice, which would be illegal.

If there is no GST credit available for that purchase (for example, if it is an item that is considered to be a "input taxable"), you are eligible to claim a deduction on your income tax return for the total gross amount paid (including the GST).

Because the prices of 'input taxed' items do not include a component that accounts for GST, consumers are unable to receive a credit for this tax. Input taxable items include, but are not limited to, rent on residential premises, financial items such as loans and ATM transactions, and sales of existing residential premises (with the exception of new residences and commercial structures).

Advice Regarding the Payment of Taxes When Beginning a Business in Australia

If you are beginning a business in Australia, you should consult a lawyer about the important tax concerns that pertain to your particular company. You are obligated to be familiar with the tax requirements that apply to your company and to fulfil those requirements. If you do not comply with these requirements, the Australian Taxation Office may require you to pay significant fines and penalties (ATO).

Important Things To Think About In Australia When Starting A Business

It is exciting to start a business in Australia, but if you do not have the correct guidance at the beginning to assist you in planning and understanding your tax duties under the law, it can also be very expensive and stressful for you.

You need to have a firm grasp on the following things before launching a brand-new company:

• Your company's legal responsibilities regarding the payment of taxes.
• The superannuation obligations of your business under the law
• The legal requirements that your company must fulfil in regard to employment
• The form of your company and the implications that it has for taxes
• Whether you are, in reality, operating a business or just doing it for fun as a hobby
• Your obligations to register your company with the ATO in this regard
• The legal prerequisites for obtaining a licence for your company
• The accounting requirements for your business
• Your legal responsibilities regarding the maintenance of records
• How you should properly disclose your earnings to the Australian Taxation Office
• Whether or whether it is necessary for you to register for GST
• Whether or not you are required to register for any additional federal taxes
• Whether or not you are required to register for any of the state's taxes
• How much of a deduction can you get for each of your expenses?
• Which types of tax paperwork are required to be submitted to the ATO?
• The times at which taxpayers are required to submit their paperwork to the ATO

Australian small company record keeping

According to the requirements of the Australian tax system, maintaining accurate records for financial and accounting purposes is both essential and vital. If you are selected for an audit by the ATO, having this documentation will make your life a lot simpler.

Keeping accurate tax records will assist you in the following ways:

• You are required to supply the ATO with written evidence of your income and expenses
• assist you or your tax agent in completing the preparation of your income tax return for submission to the ATO
• Make sure that you are in a position to claim everything that the tax rules entitle you to in an accurate manner
• decrease the likelihood of tax examinations and corrections being issued by the ATO
• resolve any concerns with the ATO that are related to contested assessments or modifications
• avoiding exposure to fines and penalties imposed by the ATO should be a priority.

Therefore, if you are starting a business in Australia, maintaining accurate records is not only important but also beneficial.

Tax regulations in Australia stipulate that owners of businesses must maintain all pertinent business records and papers for a minimum period of five years after the date on which tax documents were lodged with the Australian Taxation Office (ATO). Documents pertinent to the business include:

• tax invoices
• payment receipts
• accounting records
• bank statements
• receipts from the use of credit cards
• a record of employees (e.g. tax declarations and employment contracts)
• records pertaining to motor vehicles
• a list of both the creditors and the debtors
• a listing of both assets and obligations

If you decide to get receipts or invoices for your company, you need to make sure that they include the essential information in the appropriate places:

• a mention of the vendor's name
• number assigned to the supplier by the Australian government (ABN)
• monetary value of the investment or acquisition
• the kind of products or services that were bought or the expenses that were incurred
• time and date when the expense was first incurred
• date that the document was created.