Small Business Tax Issues

Easy Tax has compiled some helpful tips to minimise the stress of  your small business tax issues.

Congratulations! After years of planning and wishful thinking you have finally decided to start your own business. If you are obtaining income from your business and it’s not a hobby, then you need to declare your taxable income. You can also claim deductions for certain expenses that you incur when running your business. Here’s a quick rundown on the small business tax issues that you need to consider when starting your own business.

Structure of your business

You need to decide on the legal structure of your business. There are four main business structures commonly used by small businesses in Australia:

Sole traders, partnerships, companies and trusts have different legal obligations and are taxed differently. For instance, sole traders can use their individual tax file number while partnerships, trusts and companies need to apply for a separate tax file number called a business tax file number. A company will also have to apply for an Australian Company Number (ACN) before applying for an Australian Business Number (ABN).

You are not locked into a structure and as your business grows, you can change the structure of your company.

Australian Business Number (ABN)

Under Australian law, you are not required to have an ABN but having an ABN will make it easier to register for GST and other business tax registrations such as pay as you go (PAYG) withholding and avoid having amounts withheld from payments to you. Businesses must withhold 46.5% of any payments they make to you unless you quote an ABN.

An ABN is free and you can apply for an ABN by visiting the Australian Business Register.

Goods and services tax (GST)

You only have to register for the GST if any of the following apply:

  • your annual turnover is $75,000 or more or $150,000 or more if you are a non-profit organisation.
  • you provide taxi travel and/or
  • you wish to claim fuel tax credits.

You need to monitor your taxable earnings. If they rise above $75,000 or more, you have 21 days to register for the GST or you will be penalised.

Fuel tax credits

You may be able to claim fuel tax credits for taxable fuel you used in your business. The only exceptions are aviation fuels, alternative fuels and fuels used in light vehicles (of 4.5 tonne GVM or less) travelling on a public road. You can claim around $19 in fuel tax credits for every 100 litres of fuel you use in your business, even if you use it in machinery, plant or equipment such as cement mixers, compressors or bulldozers. Consult the Australian Tax Office for a full listing. To be eligible for fuel credits, you will need to register for fuel tax credits and you must be registered for GST.

Pay as you go withholding (PAYG)

As a sole trader, you pay the same tax as individual taxpayers, at personal income tax rates. You may have to register for PAYGwithholding if you make payments of a salary, wages, commissions or allowances to an individual or an employee. You may also make payments to yourself as the director of the company or make payments to contractors.

You don’t have to register with the ATO for super purposes but you must offer your employees a choice of a super fund and pay contributions into that fund.

Other business tax registrations

There may be tax registrations specific to your business that you can apply for such as:

  • fringe benefits tax, if you provide fringe benefits to employees
  • wine equalisation tax, if you are a wine manufacturer, wholesaler or importer
  • luxury car tax, if you are a retailer, wholesaler or manufacturer of luxury cars

Record keeping

You must keep any account books, records or documents related to preparing your income tax return for at least five years after they are prepared, obtained or the transaction is completed, whichever occurs last. Some records need to be kept for more than five years like capital gains tax for example. You also need to keep records like:

  • bank records
  • asset purchases
  • contracts and agreements
  • year-end records, and
  • minor deductible expenses such as claiming for certain work, car and business travel expenses.

You may also need to keep additional records if you have applied for the GST, have employees or contractor records, fuel tax records, motor vehicle records, stocktaking records and no ABN withholdings.

Consult your accountant or the Australian Tax Office in regards to your tax obligations and what specific deductions you can claim for your business.

Contact Easy tax today for all your small business tax issues.


Take advantage of our small business accounting services during which we will help you to refine your needs and consider an accounting and tax planning solution for your business going forward… make an online enquiry today or call us on +61 2 9419 5322 and let us help you solve your accounting or tax problems.

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