Published on 23/06/2018 by Any Business.Com.Au

Don't let the EOFY be a taxing time

We continue our series of tax tips as the EOFY quickly approaches. Following on from our 'changing business, changing tax obligations' blog, here we look at applicable taxes in relation to sole traders, small business owners and your tax responsibilities when it comes to employees.

Federal income tax is levied on the taxable income of a person or a business. It's calculated on assessable income less any allowable deductions.

  • Assessable income is generally income your business earns - it does not include GST payable on sales you make, or GST credits.
  • Allowable deductions are deductions for certain expenses that you necessarily incur in relation to your business.

As a sole trader, it's likely you'll pay income tax. You must lodge an income tax return for any year in which you run a business, even if you expect to have no tax liability.

If you're a sole trader or a company structure, check out the ATO's Tax differences comparison table to find out more about your tax obligations.

Pay as you go (PAYG) instalments

When your business and investment income reaches a certain amount, you'll pay your income tax in instalments throughout the year (usually quarterly). It helps so that you don't end up with a large tax bill after you lodge your tax return.

Medicare levy

Medicare is the system that gives Australian residents access to health care. To help fund the scheme, most taxpayers, including business owners and their employees, pay a Medicare levy of 2.0% of their taxable income.

Tools to work out how much tax to withhold from employees

It's important to calculate the right amount of tax to withhold from your employees' pay. If you pay casual employees or make regular weekly, fortnightly or monthly payments to your employees, there are handy tables available for use. The ATO has tax tables that allow you to enter an earnings amount and the tool will display the correct amount of tax to withhold. Tables are also available to work out the correct amount to withhold for:

  • the Medicare Levy
  • the Higher Education Loan Program (HELP) and Student Financial Supplement Scheme (SFFS)
  • superannuation payments.

A tax withheld calculator is also available to calculate the correct amount of tax to withhold for your employees or other payees.

Extra pay period in a financial year

A year usually consists of 26 fortnightly pay periods. However some years (such as the 2015/16 financial year) have 27 pay periods. This means that if you or your employees usually expect to receive a tax refund on your tax return you may find that money is owed instead, due to the extra pay period.

For the employees that you withhold tax for (through Pay As You Go (PAYG) withholding), it's a good idea to provide them with the option of withholding additional amounts from their pay to avoid the possible debt.

Tax concessions for small business

If you're a small business with an annual turnover of less than $10 million, you may be able to access a range of small business tax concessions from the ATO.

Need tax help after hours?

As a small business owner, you're often dealing with administrative work such as taxation outside of business hours.

To help you with a range of tax issues at a time that suits you, the Australian Taxation Office (ATO) offers after hours assistance for small business owners.

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AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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