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Business taxes requirements

Understand business tax requirements, including TFN, PAYG, FBT, GST, company tax, payroll tax

Starting and operating a business in Victoria, Australia, involves understanding various tax requirements. Ensuring compliance with these tax obligations is crucial for the smooth operation and success of your business.

Taxes in Australia are administered and collected by the Australian Taxation Office (ATO), and in some cases by state government revenue offices.  For Victoria this is the State Revenue Office Victoria.

This guide provides an overview of the key tax requirements you need to be aware of, including Tax File Number (TFN), company tax, Pay As You Go (PAYG), Goods and Services Tax (GST), payroll tax, Fringe Benefits Tax (FBT), and other business taxes.

Tax File Number (TFN)

A Tax File Number (TFN) is a unique identifier issued by the Australian Taxation Office (ATO) to individuals and businesses. Here’s what you need to know:

  • Apply for a TFN: Businesses need a TFN to lodge their tax returns and manage their tax affairs. You can apply for a TFN online through the ATO website.
  • Importance of a TFN: Without a TFN, your business may face delays in processing tax returns and may have to pay more tax. Ensure your TFN is registered with the ATO and is used correctly in all tax-related documents.

Company Tax

Company tax is a tax on the taxable income of companies. Here’s what you need to know:

  • Company tax rate: The standard company tax rate in Australia is 30%. However, a lower rate of 25% may apply to companies that are small businesses with an aggregated turnover of less than $50 million.
  • Lodging company tax returns: Companies must lodge an annual tax return with the ATO, detailing their income, expenses, and other relevant information to calculate their tax liability.

Pay As You Go (PAYG)

Pay As You Go (PAYG) is a system for making regular payments towards your income tax liability. It includes:

  • PAYG Withholding: If you have employees, you must withhold tax from their wages and other payments, which is then paid to the ATO. This ensures that your employees meet their tax obligations.
  • PAYG Installments: Businesses may also need to make PAYG installments to cover their own income tax liabilities.
  • Register for PAYG:  you must register for PAYG witholding

Goods and Services Tax (GST)

Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. Key points include:

  • Registering for GST: Businesses with a turnover of $75,000 or more must register for GST. You can register through the ATO's Business Portal.
  • Collecting and Remitting GST: Once registered, you need to include GST in the price of your goods and services, collect this tax from customers, and remit it to the ATO through your Business Activity Statement (BAS).
  • Claiming GST Credits: Businesses can claim credits for the GST included in the price of goods and services purchased for their business.

Payroll Tax

Payroll tax is a state tax on the wages paid by employers. It applies if your total Australian wages exceed the threshold set by each state or territory. In Victoria:

  • Threshold and rate: The current threshold for payroll tax in Victoria is $700,000. The payroll tax rate is 4.85% for businesses with annual wages over this threshold. Lower rates may apply for regional employers.
  • Calculating and paying payroll tax: Employers need to register for payroll tax, calculate the amount due based on their wages, and remit payments to the State Revenue Office Victoria.
  • Register for payroll tax:  Victorian businesses must register for payroll tax with the State Revenue Office Victoria.

Fringe Benefits Tax (FBT)

Fringe Benefits Tax (FBT) is a tax paid by employers on certain benefits provided to their employees or their associates. These benefits can include:

  • Examples of fringe benefits: Company cars, low-interest loans, entertainment, insurance and housing.
  • FBT calculation:
  • Reporting FBT: FBT is calculated on the taxable value of the benefits provided and must be reported annually.
  • Register for FBT: Businesses must register for FBT and lodge an FBT return with the ATO.

Other Business Taxes

In addition to the above taxes, there are other business taxes you may need to consider:

  • Land Tax: Payable if you own land in Victoria that is not your primary residence. The tax rate and threshold vary based on the value and use of the land.
  • Stamp Duty: A tax on certain transactions, including the transfer of property, vehicles, and certain business assets. The amount payable depends on the nature and value of the transaction.
  • Luxury Car Tax (LCT): Imposed on cars with a value above the luxury car threshold.