Business tax basics

Managing your tax affairs and obligations is an integral part of your business, particularly if you have employees. Your business's tax requirements will vary according to the type of business you run, the number of employees you have and the legal structure of your business. Tax is a complex area. Outsourcing your tax to a professional or employing an experienced accountant can help you to avoid legal and financial problems.

Tax basics

• You will need to register your business for tax—there are different types of tax which you may need to pay.
• You may need to pay tax to the Australian Taxation Office (ATO), or Queensland Revenue Office (QRO).
• You will need to lodge business activity statements (BAS).
• You will need to lodge an income tax return each year.
• You must keep good records for tax purposes.
• You may be able to reduce the amount of tax you pay through deductions.

Registering for tax

You should register your business for taxes through the Australian Government Business Registration Service.

Help with your tax

Seek professional advice

Seek tax advice from the ATO or a tax professional. The ATO administers Australia's tax laws, and applies these laws to all types of businesses.

You may be tempted to manage your business's tax yourself to keep costs down, but this can be risky. Outsourcing your tax to a professional or employing an accountant can help things run smoothly, and possibly save you money (and potential financial penalties) in the long run.

They can explain tax considerations such as:

• legal structure and the need for a tax file number (for businesses other than sole traders)
• Australian business number (ABN)
• goods and services tax (GST)
• business activity statement (BAS)
• pay as you go (PAYG)—withholding and instalments
• superannuation
• fringe benefits tax (FBT)
• payroll tax.

Check that your adviser is legitimate

• Professional tax or BAS agents should be registered with the Tax Practitioners Board.
• Financial advisers are registered with the Australian Securities and Investments Commission's financial advisers register and require an Australian Financial Services Licence.

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Common tax-related terms

Consider getting an ABN for your business. An ABN helps to manage your tax and business obligations, and is used as a reference by the ATO for your business. You will also use your ABN when dealing with other businesses and government departments.

You must lodge activity statements with the ATO to report and pay your tax. You may do this online through the ATOs online services for business. The service also allows you to manage your business's tax online.

If you (or a person on your behalf) provide certain benefits to your employees or to people associated with your employees, you may be liable for FBT. If so, you must register for FBT with the ATO, and lodge a return each year.

GST is a broad-based tax of 10% imposed on most goods, services and other items sold in Australia. Depending on your turnover or service, you may need to register for GST.

PAYG instalment is a system that allows you to pay an expected tax liability in instalments. The ATO will notify you of your PAYG obligations.

Learn more about PAYG instalment, including your responsibilities as a business tax payer.

PAYG withholding is a system of withholding income tax from an employee or contractor's salary or wages. If you business has employees, you must register for PAYG withholding.

Learn more about PAYG, including your responsibilities as an employer.

All businesses must report payroll information directly to the ATO. This includes:

• salaries and wages
• pay-as-you-go (PAYG) withholding
• superannuation fund payments
• income statements
• annual business reporting summaries.

Use Single Touch Payroll (STP) to streamline your reporting and make it easier for you to communicate this information to multiple government agencies. Every time you pay your employees via STP-enabled accounting software, this reportable information is sent to the ATO.

It may be compulsory for you to use STP-enabled software in your business. Check that STP reporting is included in your accounting software.

Taxes if you employ people

As an employer, you must be aware of your tax obligations when paying staff, including PAYG withholding tax and superannuation. Depending on the size of your business, you may also need to pay payroll tax.

The ATO provides tax information for employers about paying staff, including:

• tax rates
• paying superannuation
• employee termination payments
• redundancy pay
• paying contractors
• forms, calculators and tools to make sure you withhold the correct amount of tax.

Payroll tax

Legal information

In Queensland, your business becomes liable for payroll tax once your wage bill reaches $1.3 million a year (current threshold). If you employ people and pay taxable wages in Queensland, you must register for payroll tax within 7 days after the end of the month when you:

• pay more than $25,000 a week in Australian taxable wages
• or
• become a member of a group that pays more than $25,000 a week in Australian taxable wages.

You must register even if you think that you will pay less than $1.3 million in Australian taxable wages in a year.

Payroll tax is imposed by each state and territory, not by the ATO.

Superannuation guarantee obligations

As an employer, you can either pay a set minimum level of superannuation for each of your eligible employees, or pay a charge to the ATO.

Read the ATOs guide to super for employers.

You must use SuperStream to pay employee superannuation guarantee contributions to super funds. All employers should be SuperStream compliant.

If you have 19 or fewer employees, use the ATOs Small Business Superannuation Clearing House—a free online superannuation payments services that helps small businesses meet their superannuation obligations.

Record keeping for tax

Legal information

When you operate a business, by law you must keep certain records to explain your transactions for tax purposes. These records should include all documents that you use to determine your income and expenditure. Your accountant can help you to set up a good record keeping system.

You must keep the following records for 5 years:

• receipts for supplies, including
  • records of supplies
  • cash register (till) tapes/totals
  • deposit books and bank statements
  • expense payment records
  • invoices and statements for acquisitions
  • receipts from small cash acquisitions
  • cheque butts
  • logbooks for car expenses
  • worker payment records
  • employment declarations
  • PAYG withholding
  • employers' payment book and superannuation records.

  You must keep other receipts for supplies, including credit card dockets (merchant's copy) and cash register tapes, for 1 month if reconciled with actual sales, or 5 years if not reconciled.

  Use the ATOs record keeping evaluation tool to work out what you need to keep, and how to improve your record keeping.

  An accountant can also help you set up a record keeping system.

  Record keeping for state taxes

  You must keep records relating to duties, payroll tax, betting tax, land tax and royalty for 5 years unless advised otherwise by Queensland Revenue Office.

  You must store original documents even if you keep electronic records. For auditing purposes, electronic records must be easy to access and read.

  It is an offence to not keep these records or to wilfully damage or destroy them, even if they have been duplicated (e.g. by scanning).

  Also consider.

  • Learn about tax essentials, record keeping, superannuation and more through the ATO's free, online learning platform.
  • Watch the tax basics for small business video series delivered by the ATO.
  • Read the tax time toolkit for small businesses.
  • Find information, tips and resources on setting up and managing your business finances from our Mentoring for Growth mentors.
  • Last reviewed: 20 Dec 2021
  • Last updated: 27 Feb 2024