How Are Small Businesses Taxed in Australia? 2023 Guide
Published on April 27, 2023
When you’re a business owner, one of your responsibilities is to truly grasp the ins and outs of the taxes in your industry. But let’s face it – understanding payroll tax, capital gains, and whatnot isn’t the most fun activity. Learning about all the nuances and complexities of the taxation system in Australia doesn’t make it anymore exciting.
So how much tax does a small business pay in Australia? The exact number depends on your finance books and jurisdiction. You would need accurate financial records and a team of financial experts by your side if you want to figure out exactly how much you need to pay up to the last decimal.
Pro tip
Make sure to plot in your planner that the financial year 2022/23 ends on 30 June 2023.
How Much Tax Does a Small Business Pay in Australia?
1. Payroll Tax
| State/Territory | Tax Rate | Thresholds | Maximum Annual Deduction Entitlement* |
|---|---|---|---|
Australian Capital
Territory | 6.85% | Annual - $2,000,000 Monthly - $166,666.66 | Same as annual threshold |
New South Wales (NSW) | 5.45% | Annual - $1,200,000 | Same as annual threshold |
Northern Territory | 5.5% | Annual - $1,500,000 Monthly - $125,000 Weekly - $28,846 | Same as annual threshold |
Queensland | 4.75% for $6,500,000 or less 4.95% for more than $6,500,000
| Annual- $1,300,000 Monthly- $108,333 | Same as annual threshold |
South Australia | 0% - 4.95% for businesses that pay $1.5 to $1.7 million in taxable wages 4.95% for a business that pays more than $1.7 million in taxable wages | Annual - $1,500,000 Monthly - $125,000 Weekly - $28,846 | $600,000 |
Tasmania | 4% for businesses that pay $1.25 million - 2 million in taxable wages 6.1% for businesses that pay more than 2 million in taxable wages | Annual - $1,250,000 Weekly - $24,038 | Same as annual threshold |
Victoria | 4.85% 1.2125% for regional employers | Annual - $700,000 Monthly - $58,333 | Same as annual threshold |
Western Australia | 5.5% - 6.5% | Annual - $1,000,000 Monthly - $83,333 | Same as annual threshold |
*If your business employs workers for only a portion of the fiscal year, or across multiple states or territories, the deduction or threshold entitlement you're eligible for may be subject to reduction. In certain states and territories, the entitlement to deductions or thresholds could decrease in correlation with an increase in wages paid.
Income Tax
Income tax, also known as company tax, applies to all registered small businesses in Australia. It is levied on the net income of your business (specifically, the difference between your revenue and allowable deductions).There are two main structures for businesses when it comes to income tax: sole trader and company.
As a sole trader, you report your business income and expenses in your individual tax return, and the income is taxed at your personal marginal tax rate. Companies, on the other hand, are taxed at a flat rate of 30% for those with an aggregated turnover of more than AUD 50 million, and 25% for those below that threshold.
Pro tip
Take advantage of your available income tax concessions, such as rent, utilities, business travel, and advertising.
Capital Gains Tax
Capital Gains Tax (CGT) is levied on the profit made from the sale of a capital asset (e.g., property, shares, business assets). The difference between the sale price and the original cost of the asset is considered a capital gain, and this amount is included in your assessable income for income tax purposes.
There are a number of CGT concessions available to small businesses in Australia. One example is the 15-year exemption, which provides a full exemption from CGT if you have owned the asset for a minimum of 15 years and you are either retiring or permanently incapacitated.
Another example is called the 50% active asset reduction. As the name implies, it allows you to reduce your capital gain by 50% when you sell an active asset (i.e., something that has been used or held ready for use in the course of carrying on a business such as machinery and equipment, business premises, inventory, intellectual property, and brand reputation).
Keep in mind that CGT concessions have specific eligibility criteria.
Goods and Services (GST) Tax
This refers to the 10% tax levied on most goods, services, and other items sold or consumed in Australia, including the Southern Highlands.
If you’re small business has an annual turnover of $75,000 or more, you are required to register for GST. If your business falls below this threshold, registering for GST is optional.
The Bookkeeping Studio: Tax Return Services in the Southern Highlands Made Easy
You can’t have a successful business if you don’t pay your taxes. But the thing is, tax management can be time-consuming, complex, and feel like this never-ending lesson that you’ll just never fully grasp.
This is were our bookkeeping services can help you. You’ll have a dedicated team of financial experts by your suide, guiding you through the tax labyrinth and ensuring that you stay compliant with Australia’s regulations while maximising deductions. Leave the burden of taxes up to us.
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