As your business grows so does the complexity of your financial reporting and tax obligations. While you will be exempt from some taxes when your business is small, once you cross the threshold into bigger profits you can expect your tax obligations to include your income and staff payroll, goods and services, capital gains, and even employee benefits as part of company tax.
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What is company tax?
Company tax is an Australian federal tax charged on corporate income. It applies to all Australian residential businesses and requires payment based on a percentage of a company’s annual profits.
Types of company tax
There are a number of different taxes and payments to consider as part of company tax. These include:
- Company tax on profit
All income earned in a financial year can be part of the company tax assessment. Company tax takes all income into consideration, even capital gains and income paid into an Australian business from overseas.
- GST
Goods and Services Tax (GST) will be applied to all businesses that earn over $75,000 annually (with higher thresholds for not-for-profit businesses). GST is a flat 10% tax added to most sales and services.
- Fringe benefits tax
Some items of business purchases are calculated under a separate fringe benefits tax (FBT). These items are intended to be used as staff benefits that can include staff having a gym membership, using a company car, some meals and drinks (depending on time, place and reason for purchase), entertainment and wellness activities.
- Payroll tax
Once your company payroll exceeds a certain amount, you will need to pay an additional tax known as Payroll tax. This will need to be calculated and assessed within the company and kept in check with current state or territory regulations.
Who pays company tax?
Companies (excluding sole traders) residing in Australia that are legal entities and submit their own tax will be responsible for assessing and paying company tax based on current tax laws.
How much is company tax?
Larger companies will be charged the Non-Base Rate Entity company tax rate of 30% tax on profits while those that are eligible for the base rate (smaller and some medium businesses with less income) will be charged 25% tax on their taxable income.
The amount of company tax to be paid is calculated on profits earned annually and not the gross revenue.
The amount of company tax to be paid is calculated on profits earned annually and not the gross revenue.
Corporate taxable income is calculated by subtracting business deductibles from business income.
How to pay company tax
A business can choose to pay company tax annually to the Australian Taxation Office as part of an annual tax return or reduce the stress of tax payment expenses using an estimation through PAYG to make regular installments.
The rules for paying company tax have recently been upgraded. It’s important that you continue to check for updates on tax rules and know how they affect your tax obligations. A certified expert can help with your bookkeeping needs and will stay up to date on regulations.
