{"id":10736,"date":"2024-02-03T02:23:02","date_gmt":"2024-02-02T16:23:02","guid":{"rendered":"https:\/\/www.firstclassaccounts.com\/?p=10736"},"modified":"2024-02-03T02:25:09","modified_gmt":"2024-02-02T16:25:09","slug":"small-business-tax-australia","status":"publish","type":"post","link":"https:\/\/www.firstclassaccounts.com\/blog\/small-business-tax-australia\/","title":{"rendered":"How Much Tax Does a Small Business Pay in Australia?"},"content":{"rendered":"\n

Embarking on a business venture is thrilling, but it’s not without its complexities. Especially when it comes to taxes. <\/p>\n\n\n\n

Whether you’re just starting or you’re already in the thick of business operations, understanding your tax obligations is vital for your success.<\/p>\n\n\n\n

In this article, we’re breaking down everything you need to know about small business taxes in Australia. <\/p>\n\n\n\n

What is a Small Business in Australia?<\/strong><\/h2>\n\n\n\n

A business that employs less than 20 people is considered a small business and is a tax law category of its own. <\/p>\n\n\n\n

According to the Australian Small Bureau of Statistics, 97% of all businesses<\/a> in Australia are in this category. <\/p>\n\n\n\n

4 Size Qualifications of Businesses in Australia<\/h3>\n\n\n\n

There are typically four types of business sizes. <\/p>\n\n\n\n

Category<\/strong><\/td>Definition<\/strong><\/td><\/tr>
Non-employing businesses<\/strong><\/td>Sole proprietorships and partnerships without employees<\/td><\/tr>
Micro-businesses<\/strong><\/td>Businesses employing between one and four people, including non\u2011employing businesses<\/td><\/tr>
Other small businesses<\/strong><\/td>Businesses that employ between five and 19 employees<\/td><\/tr>
Nano businesses<\/strong><\/td>Businesses that earn under $75,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Depending on the size of your business, you\u2019ll have different tax consequences and tax concessions. <\/p>\n\n\n\n

As a small business, you’re eligible for several tax benefits, including lower company tax rates, simplified procedures for paying tax, and opportunities for instant asset write-offs.<\/p>\n\n\n\n

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4 Types Of Tax Obligations for Australian Small Businesses<\/strong><\/h2>\n\n\n\n

Small businesses in Australia have to pay different types of taxes depending on their income, business structure, and activities. These include income tax, company tax, GST, and PAYG instalments. <\/p>\n\n\n\n

Income tax for small businesses in Australia can be complicated and involves quarterly payments, various thresholds, and tax rates. <\/p>\n\n\n\n

Manage your GST obligations with ease. Find a bookkeeper near you for a free consultation!<\/a>\u00a0<\/strong><\/p>\n\n\n\n

Additionally, each Australian state, territory, and local government may implement specific tax regulations that differ from neighbouring states. <\/p>\n\n\n\n

Small business owners are responsible for reporting and paying various taxes, including income tax, GST, and payroll tax.<\/p>\n\n\n\n

Let’s take a closer look at each of these taxes:<\/p>\n\n\n\n

1. Understanding Small Business Goods and Services Tax (GST)<\/strong><\/h3>\n\n\n\n

The Goods and Services Tax (GST) is a significant aspect of small business tax in Australia. <\/p>\n\n\n\n

It is a broad-based tax of 10% imposed on most goods, services, and other items sold in the country. <\/p>\n\n\n\n

You must include GST on your sales and remit it to the Australian Taxation Office (ATO) periodically, usually through your Business Activity Statement (BAS). <\/p>\n\n\n\n

When Do You Have to Pay GST? <\/h3>\n\n\n\n

If your business has an annual turnover of $75,000 or more, you must register for GST and charge it on your taxable sales.<\/p>\n\n\n\n

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2. Income Tax: Paying Your Fair Share on Business Profits<\/strong><\/h3>\n\n\n\n

Income tax is a significant aspect of small business taxation in Australia. It refers to the tax paid on your business’s net income or profits in a financial year. <\/p>\n\n\n\n

As a sole trader in Australia<\/a>, how much tax you pay depends on your income (profit minus your allowable tax deductions on your tax return).  <\/p>\n\n\n\n

How Much Income Tax Do Australian Businesses Pay?<\/h3>\n\n\n\n

According to PWC<\/a>, Except for ‘small or medium business’ companies, which enjoy a reduced tax rate of 25%, all companies in Australia are liable to pay a federal tax of 30% on their taxable income.<\/p>\n\n\n\n

Sole trader tax rates<\/a> for the 2023-24 financial year in Australia: <\/h3>\n\n\n\n

How much tax you pay depends on your income range. <\/p>\n\n\n\n

Let\u2019s explore below: <\/p>\n\n\n\n

Taxable Income Range<\/strong><\/td>Tax Rate<\/strong><\/td><\/tr>
Up to $18,200<\/td>0% (Tax-free threshold)<\/td><\/tr>
$18,201 to $45,000<\/td>19 cents for each $1 over $18,200<\/td><\/tr>
$45,001 to $120,000<\/td>$5,092 plus 32.5 cents for each $1 over $45,000<\/td><\/tr>
$120,001 to $180,000<\/td>$29,467 plus 37 cents for each $1 over $120,000<\/td><\/tr>
Over $180,000<\/td>$51,667 plus 45 cents for each $1 over $180,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

3. Understanding Payroll Tax: PAYG Withholding and PAYG Instalments<\/strong><\/h3>\n\n\n\n

Payroll tax is levied on employee wages, and the threshold varies by state and territory. <\/p>\n\n\n\n