Tax basics for small business – overview

Tax basics for small business – overview


I started designing websites for myself as
a hobby, then some friends started asking me to design theirs. Now I’m starting to get
orders. How do I know when I’m running a business? If your activity has commercial characteristics,
you intend to make a profit and your activity is planned, organised and carried on in a
business-like manner – then you’re most likely in business. You must declare any business
income you earn, and you can generally claim deductions for expenses you incur in running
your business. I do lots of different work, some small jobs,
some bigger – how do I know which business structure is best for me? There are a few options for your business
structure. You can choose to operate as a sole trader, a partnership, or a company or
trust. They have different legal obligations and are taxed differently. The ATO can advise
you how tax applies to your chosen structure. Do I need a tax file number and an Australian
business number? If you operate as a sole trader, you can use
your individual tax file number, or TFN, for your business. If you operate as a partnership,
company or trust, you’ll need a separate TFN. As a business you may also need an Australian
business number (ABN). Having an ABN: helps you claim goods and services tax credits
or GST credits lets you register to claim fuel tax credits
you qualify for allows businesses to easily confirm your details
for ordering and invoicing And prevents businesses you deal with from
withholding amounts from payments to you under Pay As You Go or PAYG withholding. For individuals or sole traders, you can use
the ABN entitlement tool to determine if you are entitled to apply for an ABN. What sort of records do I need to keep and
for how long? Keeping good records makes it easier to do
your tax. In fact, there are many other benefits with keeping good records. You can monitor
how your business is doing, manage your cash flow and show your financial position to banks
and money lenders. Keeping good records helps you to have a good understanding of the financials
of your business, which is crucial to the success of your business. For tax, you must
keep most records for five years. The ATO has developed an electronic tool to
help you work out your record keeping needs. Based on the information you provide, the
record keeping evaluation tool will give you a list of the records you must keep and a
report that shows how well you’re keeping your records. It’s a clever tool – where it
can, the report will also include suggestions for improving your record keeping. When do I need to register for GST? You must register for GST, if your business
turnover exceeds the GST registration threshold. You must also register if you are a taxi driver,
or provide a limousine or hire-car service. If you are registered for GST, you must pay
one-eleventh of your taxable sales to the ATO. You can claim credits for the GST you
pay in the price of your business purchases. How do the fuel tax credits work? Fuel tax credits are amounts you can claim
for the fuel tax included in the price of fuel you acquire and use for your business
activities. If you’re eligible to claim, you will need to find out the rate you can claim.
The rates vary depending on what fuel you use and your business activities. Your business
must be registered for both fuel tax credits and GST before you can claim fuel tax credits. The café is doing really well, I didn’t expect
it to grow so quickly – now I’ve got staff, do I need to withhold their tax? If you pay employees and directors, you need
to be registered for pay as you go, or PAYG, withholding and send the amounts you withhold
to the ATO. In some situations, you may need to withhold
amounts from payments to other businesses. What about super for my employees? As an employer, you must pay super for your
eligible employees and certain contractors. This is called the superannuation guarantee.
Your employees may also be eligible to choose the super fund you pay their super into. Do we need to lodge business activity statements? Most businesses must lodge a business activity
statement, or BAS, and pay their tax every three months. If you operate a small business,
you may be eligible to lodge once a year. You can lodge your BAS online through the
Business Portal or using Standard Business Reporting enabled software. To do this, you’ll
need an AUSkey. More information is available at ato.gov.au forward slash onlineservices. You should always lodge your activity statements
on time to avoid any penalties even if you can’t pay! The ATO offers a range of information and
services to make it easier for you to comply with your business tax obligations. Check out their website or for more information
call the numbers on screen.

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