Taxation essentials

  • A tax file number (TFN)
    • Sole traders can use their personal TFN
    • Partnerships, companies and trusts require a separate TFN
  • An Australian Business Number (ABN)
    • Required when invoicing businesses. If you don’t provide one, the ATO will withhold 46.5 per cent of any payments
    • Makes it easier to register for GST and PAYG withholding
  • Goods and services tax (GST) registration
    • Compulsory if your current or projected turnover is $75,000 a year or more, you provide taxi travel or want to claim fuel tax credits
    • Voluntary if turnover is below $75,000
    • Once turnover reaches $75,000 or more, you have 21 days to register
  • Pay as you go (PAYG) withholding
    • Required if your business pays salary or wages, makes payments to contractors or directors, or withholds 46.5 per cent from suppliers who do not provide an ABN
    • Money drawn as a sole trader or partner is not a wage, so registering is not required unless other reasons apply
  • Fringe benefits tax registration
    • Only required if you provide fringe benefits to employees
  • Fuel tax credits registration
    • Only required if you use eligible fuel in your business

  • Required by tax law
  • Most records must be kept for five years after being lodged in a tax return
  • Relevant documents include:
    • Income and sales records
    • Expense or purchase records
    • Bank records
    • Asset purchase records
    • Contracts and agreements
    • Year-end records
    • Minor deductible expenses (if you can’t get receipts for all of these, keep a diary or logbook)
    • GST records, plus a record of any suppliers who have not quoted their ABN
    • Employee and contractor records, such as payments, super, copies of TFN declarations and any contracts
    • Vehicle records
    • Stocktake records
    • Fuel tax credit records (for claims of over $300) to show you bought the fuel, used it for your business and applied the correct rate to calculate your claim amount 

  • You can claim for expenses incurred in carrying on a business
  • You must have spent or committed to spend the money
  • The expense must be clearly related to your business
  • You can’t claim for a number of things, including:
    • Private and domestic expenses
    • Most capital expenses, which are incurred when expanding, replacing or improving a business
    • Most expenses incurred before starting the business
    • GST if you claim GST credits on your business activity statement (BAS)
    • The super guarantee charge – the amount you pay if you don’t contribute the right amount of super for employees or if your contribution is late
  • Where you have incurred expenditure in or on your business but are uncertain as to its treatment for tax, retain as much detail in respect of the expenditure and discuss with your tax advisor
  • If you are planning significant expenditure, consult your tax advisor before committing to the expenditure to understand the tax implications

  • Available for small businesses with an aggregated turnover of less than $2 million
  • 25 per cent entrepreneur’s tax offset for business owners with a total turnover of $75,000 or less
  • Simplified depreciation rules, including an immediate write-off of depreciating assets costing $1000 or less
  • Immediate deductions for prepaid expenses if the service you are paying for will be completed within a 12-month period ending in the next financial year
  • Simplified trading stock rules that could remove the need for a tax-time stocktake if your trading stock has not increased or decreased by more than $5,000 over the year
  • Capital gains tax concessions for eligible businesses, including paying tax on 50 per cent of the capital gains from sales of business assets
  • Exemption from fringe benefits tax (FBT) for employee parking, subject to eligibility rules
  • Some companies are eligible to make PAYG instalments based on GDP-adjusted notional tax 

  • If your business is registered for GST, you must collect it on every taxable sale you make and pay it to the ATO
  • When you purchase supplies for your business, you can generally claim the GST part of the purchase price as a GST credit
  • At the end of each BAS period, send the GST you’ve collected, minus any GST credits, to the ATO
  • Use the BAS to account for your GST, PAYG instalments and withholding, fuel tax credits and FBT instalments
  • Small business entities may elect to lodge GST returns annually and remit GST in quarterly instalments 

  • Determine whether staff members are employees or contractors using this ATO checklist
  • For employees you must:
    • Register for PAYG withholding before you withhold any amounts
    • Withhold PAYG from amounts you pay to employees, including wages, commission, and hourly rates. The ATO has tables telling you how much to withhold
    • Report and pay those withheld amounts when you submit your activity statement
    • Give annual payment summaries to your employees and the ATO
  • For contractors you:
    • Don’t have to withhold amounts unless the contractor specifically asks you to. The contractor manages their own tax liability
    • Can create a voluntary agreement (contractor must have an ABN and you must both complete a voluntary agreement form) 

When it comes to tax, there’s nothing like professional advice from someone who knows you and your business inside out. That’s why a good accountant is the number one tax essential.

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Important information

As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. View our Financial Services Guide (PDF 59kb).