Every business must pay tax (unless below threshold) on its income, or more specifically, on its net profit. For many small business owners, the subject of income tax makes them want to rip their hair out! Tax is complex if you are not a professional in the field, yet if done accurately; it will give you less stressful nights. 

Here is some basic information and guidelines for a small business needing to pay tax.

How Much is the Tax Rate for Small Businesses in Australia? 

Small businesses in Australia are required to pay a tax rate of around 25%. This will, however, depend on the type of company entity one creates, as the Australian Taxation Office (ATO) taxes different entities at different rates. 

When it comes to payroll taxes, these vary depending on the state or territory in which your small business is registered. Note that there are other taxes that depend on your business, say selling taxable goods and services, owning real estate for business, using equipment, and others. 

How Do You Calculate Small Business Taxes? 

The ATO website is a great resource for small businesses in Australia to discover the appropriate tax calculators for their needs. But besides automated calculators, it is highly recommended to use a small business accountant. A professional understands the tax laws and can help you obtain the best returns and deductions while ensuring you stay compliant. 

What is the Tax-free Threshold for a Small Business? 

The tax-free threshold for small businesses is $18,200 but it only applies to sole traders and individuals.

That’s because there is no tax-free threshold for businesses that operate as registered companies. The tax-free threshold is exclusively available to small businesses operating under a sole trader Australian Business Number (ABN).

Preparing your business’ tax return can be time-consuming, confusing and tedious. However, it’s essential to file your returns correctly to avoid severe fines or prosecution. Perth Mobile Tax can help. For help with your small business tax returns and bookkeeping services in Perth, contact us.

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