It is crucial to understand the income tax for your business, and this page will help you to understand how to manage your Australian income tax and how to get assistance.
How the Australian income tax works.
Your taxable income determines how much income tax your company must pay. It is calculated using your assessable income with fewer deductions.
The income that your business makes is called the assessable income-external site. This includes all gross income (before taxes) from your daily business activities (sales, etc. It does not include GST payable on sales or any other income, such as capital gains. This does not include GST that you pay on sales or GST credits.
For every year that your business is in operation, you must file an income tax return. Even if you don’t anticipate owing tax, you must file.
You can deduct expenses incurred in the operation of your business.
Pay your income tax in instalments.
Installments are paid to your Australian income tax when your investment income and business reach a certain level. These installments are typically quarterly. This allows you to avoid large tax bills after you file your tax return.
Australian income tax concessions are available for small businesses.
The ATO may offer tax concessions for small businesses with a turnover of less than $10,000,000 annually.
The ATO website provides information about the tax concessions that are available, eligibility, and tax changes related to the concessions-external site.
Company income tax rate.
The company tax rate at 30% is the full rate, and 27.5% is the lower rate. Your business can be eligible for the lower tax rate starting in the 2017-2018 income year if it is a base rate entity.
A company with a base rate entity is one that has both:
- A total turnover of less than $50 Million from 2018-2019 (25 million for 2017-2018).
- Base rate entity passive income, such as interest, dividends, or rent, should not exceed 80% of your assessable income.
In recent years, the eligibility requirements and lower company tax rates have been modified. To learn more about changes in company tax rates, visit the ATO website-external site.
Additional pay period in financial years.
A year typically consists of 26 weekly pay periods or 52 fortnightly payments. In some years, however, there may be an additional pay period. You may discover that there is not enough money withheld at the close of each financial year due to the extra pay.
TO AVOID POSSIBLE DEBT, IT IS A SMART IDEA TO OFFER YOUR EMPLOYEES THE OPTION TO WITHHOLD ADDITIONAL PAY AS THEY GO (PAYG).