Small firms in Australia are typically those with a yearly revenue of less than $10 million. Small businesses have a reasonably basic and straightforward tax system with a variety of tax breaks and incentives available to aid in their expansion and success.
Understanding the many sorts of taxes that are relevant is the first step in understanding the Australian tax system for small businesses. These consist of:
Income tax: This is the tax that is levied against a company’s profits. For the 2020–2021 fiscal year, small firms in Australia are typically eligible for a lower corporate tax rate of 27.5%; this rate will rise to 28.5% for the 2021–2022 fiscal year.
The majority of products and services sold in Australia are subject to the goods and services tax (GST), which is a type of value-added tax. Small firms with annual sales of less than $75,000 are exempt from the GST registration requirement, but those with annual sales of $75,000 or more must register and collect the GST from customers.
Payroll tax is a charge that businesses must pay on the wages and salaries they give their employees. Depending on the state and territory, different amounts must be paid in payroll tax before small firms are generally compelled to do so.
Small businesses may also be qualified for a number of tax breaks and incentives in addition to these taxes. These consist of:
Instant asset write-off: Small firms are permitted to claim an immediate deduction for assets purchased during the 2020–2021 fiscal year that cost less than $150,000.
Tax incentive for research and development (R&D): Small enterprises that engage in R&D may qualify for a refundable tax offset of up to 43.5% of their R&D expenses.
Small business superannuation clearing house: Instead of juggling many accounts, small businesses can utilise this service to settle the superannuation payments made by their employees through a single internet interface.
The material provided above should be seen as a broad overview of the Australian tax system for small businesses; specific laws and regulations may change based on the nature of the firm and its particular circumstances. For more thorough guidance on how the tax code affects your company, it is always preferable to speak with a certified tax practitioner.