It is crucial as an owner of a small businesses that you have a solid understanding of your tax obligations.
Managing your tax affairs and obligations as an employer is integral part of running your business. Your business tax obligations and entitlements depend entirely on the type of work you do, the number of staff you employ and the kind of benefits you offer your employees (e.g. salary sacrifice).
We’ve put together some information to help you meet your tax obligations as a business owner, we will cover BAS, GST, PAYG, Fringe Benefit Tax and Superannuation. All of these areas require understanding when managing your tax affairs and employer obligations.
At Funda we speak with a lot of business owners who are a bit behind in their tax obligations and are looking for a short term business loan to get them back on track. If you’re one of these businesses you’re not alone!
Did you know there’s $10 billion in unpaid small business tax outstanding?
This is a common business loan purpose we fund. At Funda, we help businesses get back on track. If you’re looking for a business loan to appease tax obligations, check out our business loans.
Business activity statement (BAS)
A business activity statement (BAS) is a requirement for business to report and pay their business taxes to the ATO. BAS statements are issued either monthly or quarterly. A BAS reports on Goods & Services tax (GST), Pay as you go (PAYG) instalments and PAYG withholding tax.
Not everyone needs to lodge a BAS. You are only required to do so when your business’ gross income is equal or greater than $75,000. In the early stages of your business, when you are registering for an Australian Business Number (ABN) and GST, the ATO will let you know when a BAS is due to be lodged. Read more about ATO’s BAS requirements.
It is also worth noting that BAS requirements differ according to the structure of your business. For example, a sole trader’s obligations differ to a private company. Make sure you check out the ATO website to find out what your requirements are based on your business’s structure.
Handy tips for preparing your BAS
Know your dates
Be prepared and know your BAS lodgement dates. You can lodge your BAS monthly, quarterly or annually, how often you lodge will depend on the rate of your cash flow.
Having thorough records and regularly updating your accounts with the relevant information, such as transactions the business has conducted, will ensure the process is relatively quick and easy.
Setting up an accounts system based on the categories of the BAS form will make the reporting your BAS much easier. Make sure to include all the statements for the given period of the BAS statement.
Goods and services tax
The reason most business need to lodge a BAS is to report and pay GST, only eligible small businesses are only required to account for GST. All businesses must register for GST if they earn the $75,000 annually or if it looks likely you will exceed it. Small businesses with a turnover of less than $75,000 are given the choice of registering for GST.
Handy tips when reporting your GST
- Keep records of all sales and purchases
- Understand if the goods or services you sell are subject to GST
- Put aside any GST collected so you can pay when its due
- Use a cloud-based accounting system, such as Xero, to keep account records organised
Pay as you go (PAYG) Withholding
PAYG is a way for small business owners to collect income tax payments from their employees. As most are aware, the simplest way is to take out the tax from your employees’ wage. All small businesses must submit a PAYG Withholding annual report at the end of each financial year. The report includes all payments made to payees during the financial year and the amounts your withheld from those payments.
One of the biggest mistake’s employers can make is not planning for it, ensure you set aside your PAYG obligations throughout the year, so you’re not caught out at tax time by not having enough funds on hand to pay your obligations.
Pay as you go (PAYG) instalments
PAYG instalments are regular payments you can make throughout the year towards your expected annual income tax liability. It helps you reduce the chance of having a large tax payment after you lodge your tax return. After your business lodges a tax return, the ATO will notify if you need to start paying by instalments under the PAYG instalment system. It only applies to your business if you are over the threshold.
Fringe benefits tax
FBT is paid by employers on certain benefits they provide to their employees or their employees’ family or other associates. These benefits can include; allowing an employee to use a work car for private purpose, giving employee a discounted loan, paying employees gym membership and giving benefits under a salary sacrifice arrangement with an employee. FBT is separate to income tax and is calculated on the taxable value of the fringe benefit. Business owners can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay.
As an employer you can either pay a set minimum level of superannuation for each of your eligible employees or pay a charge to the ATO. Any small business with 19 or fewer employees or small business with an annual aggregated turnover of less than $10 million can benefit from the ATO’s free online superannuation payments service Small Business Superannuation Clearing House (SBSCH).
Features of the SBSCH include the ability to pay employees super via the SuperStream which allows you to make all your contributions for each period in a single transaction, even if your payments are going to multiple super funds. Also, the SBSCH ensures your Superannuation Guarantee (SG) are meet as soon as your payment and instructions are accepted by the SBSCH.
A final recommendation for small business owners who are starting a business, or if you’ve been running your business for a while is its vitally important you’re using the appropriate online accounting software for your needs, as well as consulting with an experienced bookkeeper or accountant. It does pay to have a basic understanding of taxation and being on top of your records will help you to meet your tax obligations in an effective timely manner.
Note. The webpage content is of general nature only and you should speak to an accountant/ tax professional for advice.
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We’re always here to help with any finance requirements you have may have, whether you need a small business loan to help meet your tax obligations or for another business purpose.
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