April 12, 2021
Owning a small business? Then, you must have understood that one of the most difficult but important responsibilities of being a small business owner is to comply with legal tax obligations. Well, your hired tax accountant may deal with all the tax-related activities, but as an owner, you have to be aware and understand all the legal obligations because the information that you will provide to the Australian Taxation Office or ATO must be accurate. Here, you will get a rough idea of the tax responsibilities that you must know as a small business owner.
Business Registration For Taxes
- Australian Business Number: This is the first step to set up your business. This Australian Business Number or ABN is a registration number that is issued to any business for the purpose of identification by ATO, other government departments, businesses and individuals. You can easily register your business online and get your ABN for free. This ABN will be linked to you as an individual when your business is registered as sole trader. But in other cases like trust, company or partnership, ABN will be linked to that entity, not you as an individual.
- Tax File Number: This is another unique number used for filing necessary business tax return. You can use your personal TFN if your business is a sole trader or partnership. But, for a company or a trust or any other business structure, the TFN will be linked to that entity. While registering for ABN, you can also get TFN along with it.
- Goods and Service Tax: For a standard business turnover, you need to register for GST. If the annual turnover is less than that standard amount, you will still need to register for the same. If you do not register it, then also you need to do it once your turnover touches the threshold. You can register this too with ABN application.
- Additional taxes: Your business can register for other taxes too, wherever applicable, apart from GST. These taxes include FBT or Fringe Benefits Tax, LCT or Luxury Car Tax, FTC or Fuel Credits Tax.
Keeping and Maintaining All Business Records
Keeping and maintaining all business records is the must-do requirement for any business to run successfully. You can keep a professional book-keeper or accountant for this purpose. The transactions that should be kept properly include:
- Receipts: A business involves number of alternating sales and purchases. You need to keep all the receipts of all these trading activities.
- Tax invoices: Tax invoices are extremely important for necessary tax filing and small business tax return.
- Wage and salary records: As a business owner, you need to give salaries to your employees. So, it is also your responsibility to keep a detailed record of salaries (when it is given, how much tax is deducted etc.) given to different staff members.
- Other records: You need to keep other records of sale or purchase of business assets like land, building or business machinery.
In a record of a transaction, the general points you have to include are date, amount, character (like rental, wage, sale or purchase) and purpose. The information that you’re putting in the records must never be changed and kept as secured as possible. Also, you should keep the information for a period of at least 5 years.
Reporting of Business Activity Statement
Now as you have your well-kept business records in your hands, you should provide detailed reports on them to the ATO. The information in the report will include business income, expenses and tax obligations and you have to submit this report through a Business Activity Statement. In case your business is not registered for GST, you need to report the business tax obligations through Instalment Activity Statement or IAS.
Depending on the size of your business and your subsequent annual turnover, you may lodge BAS monthly, quarterly or yearly. As a small business owner, you may go for the option of lodging it quarterly. You will feel relieved to know that ATO will send you your BAS electronically when the time has come to lodge, and there will be several boxes completed for you, which will make your job easier. These will be time period to which it is related, business details and due date for BAS.
Read More: - Key Points You Should Know When Preparing BAS!
If you have employees in your business, you have to register for pay as you go (PAYG). You need to withhold a certain amount from the payments you generally give to your employees. You will withhold this percentage based on the information they had provided you in their tax file number declaration. Besides PAYG, you will also require to pay your employees’ superannuation guarantee (SG) to their nominated super account.