Australia: Tax & Auditing Requirements
Key features of taxation for companies are as follows:
- must apply for a tax file number (TFN) and use it when lodging its annual tax return
- is entitled to an ABN if it is registered under the Corporations Act 2001. A company not registered under the Corporations law may register for an ABN if it is carrying on an enterprise in Australia
- must be registered for GST if its annual GST turnover is $75,000 or more
- owns the money that the business earns - the individuals who control the business cannot take money out of the business, except as a formal distribution of the profits or wages
- must lodge an annual company tax return
- usually pays its income tax by instalments through the Pay As You Go (PAYG) instalments system
- pays tax at the company tax rate and may be eligible for small business concessional rates
- must pay super guarantee contributions (SGC) for any eligible workers. This includes you, if you are a director of the company, and any other company directors.
Key features of taxation for a partnership are as follows:
- income, losses and control of the business are shared among the partners
- the partnership has its own TFN and must lodge an annual partnership return showing all income and deductions of the business
- the partnership doesn’t pay income tax on the profit it earns – each partner reports their share of the partnership income in their own tax return
- each partner pays tax on their share of the partnership profit at the individual tax rate and may be eligible for the small business tax offset
- the partnership must apply for an ABN and use it for all business dealings
- the partnership must be registered for GST if its annual GST turnover is $75,000 or more.
As a partner you can’t claim deductions for money drawn from the business. Amounts you take from a partnership are not wages for tax purposes.
Key features of taxation for a sole trader are as follows:
- use your individual tax file number when lodging your income tax return
- report all your income in your individual tax return, using the section for business items to show your business income and 3. expenses (there is no separate business tax return for sole traders)
- apply for an ABN and use your ABN for all your business dealings
- register for Goods and Services Tax (GST) if your annual GST turnover is $75,000 or more
- pay tax at the same income tax rates as individual taxpayers and you may be eligible for the small business tax offset
- put aside money to pay your income tax at the end of the financial year - usually, you will do this by paying quarterly Pay As You Go (PAYG) instalments
- claim a deduction for any personal super contributions you make after notifying your fund.
As a sole trader you can’t claim deductions for money ‘drawn’ from the business. Amounts taken from the business are not wages for tax purposes, even if you think of them as wages.
Key features of taxation for a trust are as follows:
While a trust must lodge an annual tax return, whether the trust pays tax (or not) is determined by how the trust income is distributed:
- if all trust income is distributed to adult resident beneficiaries, the trust is not liable to pay tax – each beneficiary reports the income in their own tax return
- if all or part of the net trust income is distributed to non-residents or minors, the trustee is assessed on that share on behalf of the beneficiary – these beneficiaries may need to declare their share of the trust’s net income in their own income tax returns, and can claim a credit for the tax paid on their behalf by the trustee
- where the trust accumulates net trust income (does not distribute it), the trustee is assessed on that accumulated income at the highest individual tax rate.
Complete information on the tax returns needed to be filed by business entities based on their structure type can be found on the Australian Taxation Office website
Detailed information on how to report pay tax can be found on the Australian Taxation Office website