Have you identified your taxation obligations?
A range of taxes affect small business, so before you begin operating you'll need to know what you must do to comply with government taxation regulations.
Register for an Australian Business Number (ABN)
The ABN is a unique 11 digit identifying number that businesses use when dealing with other businesses. For example, you generally need to put your ABN on your invoices, or other documents relating to sales that you make. If you don't, other businesses may withhold 46.5% from any payment to you.
You also need an ABN in certain dealings with the Tax Office and other areas of government.
Registering for an ABN is not compulsory, but you will need one to register for the GST. Your ABN allows you to:
facilitate a single Business Activity Statement
confirm your business identity to others when ordering and invoicing
avoid PAYG tax on payments you receive
claim GST credits
claim energy grants credits
obtain an Australian domain name.
Register for Fringe Benefits Tax
FBT is a tax payable by employers for benefits paid to an employee or the employee's associate in place of salary or wages. Examples of benefits include a car, car parking, low interest loan and payments of private expenses.
If you are an employer and provide fringe benefits to your employees, the Tax Office recommends that you register for FBT.
Register for Goods & Services Tax
You must register for GST if:
your business has a GST turnover of $75 000 or more ($150 000 or more for non profit organisations)
you provide taxi travel as part of your business, regardless of your GST turnover.
To register for GST you will need to complete an application form. If you wish to apply for an ABN at the same time, then use the same form.
Be aware that you need an Australian Business Number (ABN) to register for GST, as the ABN is part of the GST system. Your ABN will also be your GST registration number.
Register for Pay As You Go (PAYG) withholding
PAYG withholding is a legal requirement to withhold amounts for income tax purposes.
If you have employees, you're required to withhold tax from payments you make to them. You may have to withhold tax from payments to other workers, such as contract workers.
You may also need to withhold an amount from payments to other businesses if they don't quote their ABN to you on an invoice or other document if required.
You must send all withheld amounts to the Tax Office.
As a new employer, you must register with the Tax Office before you withhold from payments to your employees.
Register for a Tax File Number (TFN)
A TFN is a unique number issued by the Tax Office to individuals and organisations.
Partnerships, companies and trusts need their own TFN. A TFN can be obtained at the same time as an ABN, using the same application form.
Sole traders use their individual TFN in dealings with the Tax Office.
Some of the main reasons for having a TFN are:
to quote to employers (this applies to individuals only)
to quote to investment bodies responsible for paying interest, dividends and unit trust distributions
to quote to government bodies, for example the Tax Office, when applying for an Australian Business Number (ABN) or lodging income tax returns.
Register for Pay-roll tax
Pay-roll tax is a state tax on the wages paid by employers. It is calculated on the amount of wages you pay per month. You must pay pay-roll tax if your total Australian wages exceed the exemption threshold that applies in your state or territory - exemption thresholds vary between states.
This information was provided to HBC by I&I NSW
