Running a business means paying taxes, but this can be confusing if you do not know where to start. Below are just some of the terms you will be expected to become familiar with. Other terms will vary based on your industry, type of ownership or other factors.
1) TFN: Your Tax File Number of TFN is used by the government to recognize all your tax filings/records. All individuals should have one, and business owners can use their personal TFN only if operating under the status of “sole proprietor”. In not, the business will need its own.
2) ABN: Your Australian Business Number or ABN is optional, but it does offer convenience. Besides making it easier to complete tax registrations for your business including GST, it also prevents other companies from withholding 46.5% of their payment to you for tax purposes. Your business only needs one ABN no matter how many parts it has, but you will need separate ABNs if you open two or more independent businesses.
3) GST: The GST or Goods and Services Tax is currently set at 10% and is charged on most goods being supplied. Registration for this tax is optional if your annual turnover for GST is below $75,000. However, it is compulsory once you are making (or start making) is at or more than $75,000, you are offering taxi travel, or you want to claim tax credits for fuel.
Note as well that registration for non-profits is not compulsory until their GST turnover is $150,000 or more. As a business owner, you must fully understand how to work out your GST turn over before registering. Also, you need to know what it means to account for your GST using cash or on a non-cash basis since you will have to make this decision when registering.
4) PAYGI: PAYGI stands for “Pay As You Go Instalments” and refers to small payments made towards your projected income tax obligation. You are unlikely to make this payment in your first year of business, but you must submit your return showing all investment income or business profits so an assessment can be done. After the assessment, you will receive a letter to advise you if payments are required. Payments may be annually, but they are usually done on a quarterly basis.
5) PAYGW: PAYGW or Pay As You Go Withholdings refers to tax withholdings from employee wages and will apply to you if you have employees. The amount withheld must be turned over to the tax office whether quarterly or monthly, with this depending on the size of your payroll. The calculation will depend on the rates outlined in the tax tables set out by the Tax Office.
6) FBT: FBT or Fringe Benefits Tax registration is compulsory if you offer such benefits to your employees. Benefits can include school fees, health insurance, or the use of company cars for private purposes. This list is not complete, so you must ensure that you understand how the benefits you give are classified.
A bookkeeper can help simplify your understanding of the tax process and help you be compliant at all times.
