Business Tax 101
Tags: ERP   Accounting  
13/05/2011 12:00 AM

Undertaking your own business enterprise can be difficult enough without having to worry about the complicated process of keeping your business taxes in order. In this article I’ll take a look at some of the basic things to keep in mind when working out your business tax, as well as how specialised Business Software can make running your business a heck of a lot easier.

1. Registering your business for tax purposes
The most common registrations you must make for business tax purposes include:

  • Tax File Number (TFN): Most individuals will have a tax file number already. If you’re operating your business as a sole trader, you can use your TFN for business purposes

  • Australian Business Number (ABN): When you register for an ABN your business is added to the Australian Business Register (ABR). If you don’t have an ABN, other businesses must withhold 46.5% of payments made to you. Having an ABN also makes it easier to register for GST and PAYG withholding

  • Goods & Service Tax (GST): If your projected annual turnover is over $75,000, you must register for GST. As a result, projected turnovers must be continually monitored, and when you realise your annual turnover will exceed the threshold, you have 21 days to register. You must also register for GST if you provide taxi travel or want to claim fuel tax credits

  • PAYG withholding: If your business makes payments you must withhold amounts from for tax purposes – such as salary, wages, commissions, bonuses and allowances – you must register for PAYG withholding

2. Keeping proper records
When it comes to business tax, there’s nothing more important than keeping proper records. When you pay your tax, the Tax Office assumes that the details you’ve provided are true. However, you may be called on to prove your claims at some point in the future, and if you don’t have appropriate records to back everything up, you can incur fines. Some of the things you must keep records of include:

  • Income and sales
  • Expenses and purchases
  • Bank transactions
  • Asset purchases
  • Contracts and agreements

Tax laws say you must keep your records in plain English for five years. Ensure you have a good filing system. You should consider using Enterprise Resource Planning (ERP) software, particularly as your business grows. ERP software automates several of the tedious processes involved in running your business, and no task can be more tedious than keeping records for tax purposes.

3. Working out your income tax
Your taxable income is worked out as your assessable income (basically, your business earnings) minus your allowable tax deductions. Allowable deductions refer to any expenses you occur in the running of your business, and may include:

  • Advertising
  • Bank fees
  • Business travel
  • Depreciation in assets
  • Electricity
  • Employee wages
  • Fringe benefits
  • Home office expenses
  • Interest on borrowed money
  • Motor vehicle expenses
  • Phone expenses
  • Renting or leasing business premises
  • Repairs
  • Super contributions for employees
  • Tax agent fees
  • Transport and freight

If you work from home, you can also claim home expenses – such as rent, mortgage interest, land taxes, phone, internet, depreciation of office furniture, heating, cooling and cleaning – provided you have an area in your home set aside exclusively for business activities.

Comments
Huey said:
6/07/2014 12:51:16 PM
That is a very good tip especially to those fresh to the blogosphere.
Brief but very accurate information_ Thanks for sharing
this one. A must read post!
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