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Business tax

Tax returns

Tax returns must be submitted each year (unless your income is less than the minimum amount at which tax is payable). There are separate tax return forms for each business structure;

  • sole traders must lodge returns for the business and their personal tax;
  • a partnership return details the income of the partnership; each partner then files a separate return for personal tax that includes the partner's share of the partnership income;
  • trust returns are required for every trust. This will include details of the income of the trust and distributions (if any).
  • companies have returns in their own right because they have a separate legal existence.

Tax deductions

These are the expenses incurred in running the business. Deductions can include expenses such as:

  • rental/lease;
  • rates;
  • insurance and superannuation;
  • car expenses;
  • bad debt costs;
  • repairs and maitenance;
  • interest on borrowed funds etc.

Depreciation and losses

This is not a deduction in the same way as other expenses, but is a way of spreading the cost of capital equipment over a number of years - it is still a deduction. The amount of depreciation you can claim varies.

If your business suffers a loss (as distinct from a capital loss), the loss may be able to be carried forward to be deducted from income in later years.

Your accountant will be able to provide information on depreciation and carrying forward losses.

Types of business tax

  • Fringe benefits tax - FBT is levied against a business on any benefits that are received by an employee, e.g. a company car or interest free loan, and applies to all businesses. Note. Some benefits are not taxable - talk to your accountant or solicitor about this.
  • Capital gains tax - CGT is levied on the profit that is made on the sale of any asset bought after 19 September 1985. It also applies to the sale of goodwill. The rate of tax depends on a range of circumstances, talk to your accountant.
  • Payroll tax - this is a State tax that is levied against employers if they pay wages/salaries (and other forms of remuneration such as health insurance contributions) over a certain amount of money, depending on the particular State law.
  • Land tax - this is State tax levied against businesses that own their own premises (in some States it is also levied against homes and rental properties). If you are a tenant of business premises check with your accountant or solicitor, as this tax may be payable depending on the terms of the lease.
  • Customs duty - if you import goods you will have to pay a duty based on the value of the goods and the rate of duty set out in the Custom Tariff Act.
  • Stamp Duty - this is a duty that applies to a range of commercial documents. The amount of duty usually depends on the subject of the agreement, ie the value of land being transferred or the rent paid under a lease etc.
  • PAYG - the PAYG system began on 1st July 2000, and for most businesses it means one set of rules, one set of payment dates and one form to fill in. The new PAYG system replaces 11 existing reporting and payment systems, including provisional tax, Pay As You Earn (PAYE, or group tax) Prescribed Payments System, and the Company Instalments System (COIN).
  • Goods and Services Tax (GST) - where to start. You could fill a whole web site just with information about this tax - and many have.
  • Child support - this is not really a tax, but you can be sent a notice from the Child Support Agency requiring you to deduct certain amounts from an employees wage.

Disputes

You can dispute the assessment of the Tax Office. To do this you should lodge a written objection with the Tax Office, stating the reason you believe the assessment is excessive (we assume you won't complain if it is not large enough!). We recommend strongly that you get legal advice before you take this step.

Tax audits

This is something that strikes fear into most business owners. It can either take place because of a random check, or because there is a serious query about your tax return. The Tax Office can look at your books, or any other business records that are relevant to the payment of tax. It is very important to get legal and/or accounting advice if you are to be audited, because the penalties can be harsh.

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