If you are planning to set up a business in Australia, then you need to be aware of the tax laws and types of taxation that are imposed on Australian businesses. All Federal taxes are collected by the Australian Taxation Office (ATO). If you want to avoid penalties, then you need to pay your taxes on time. There are also a number of different tax concessions offered by the Federal and state governments. Taxes are paid either monthly, quarterly or annually, depending on the tax.
Goods and Services Tax (GST)
The Goods and Services Tax (GST), was introduced in Australia from 1 July 2000. GST is levied at the rate of 10% on transactions relating to the provision of most goods and services supplied in Australia. It is compulsory for businesses with a turnover of more than $75,000 to register for GST with the Australian Taxation Office. There are two types of exemptions “GST Free” and “Input Taxed” transactions that your business may be eligible for.
All resident companies in Australia are required to pay company tax (also known as Corporate Tax). The Tax Act defines a company to include all bodies or associations incorporated or unincorporated, but specifically excludes partnerships from the definition. It is necessary to determine whether or not a company is a resident of Australia for tax purposes.
The Tax Act defines a resident of Australia to include any company which is incorporated in Australia, or carries on business in Australia and has either its central management and control in Australia or its voting power controlled by shareholders who are residents of Australia.
The company tax rate is determined by the Australian Government.
Non-resident companies may be taxed on income from their Australian activities if they have a presence in Australia (referred to as a “Permanent Establishment”), and the rate is the same as a resident company. Taxable income and tax rate depends on the type of industry and business structure.
Capital Gains Tax
If you are disposing assets then the capital gained is subject to Capital Gains Tax (CGT). This tax is paid as part of the income tax.
Each of the States and Territories of Australia imposes payroll tax on employers in respect of wages paid to employees. The rate varies between States and Territories and there is also what is known as the payroll tax exemption threshold. Certain exemptions exist where the monthly or annual payroll does not exceed a specified limit.