Tax, as they say, just like death is inevitable.  And when it comes to running a small business, tax is there from the very start.

In setting up your company unless you are a sole trader, you will have to apply for a tax file number. As a sole trader you just use your individual tax file number.

You will also probably need an Australian Business Number (ABN).  You can apply online for both a TFN and an ABN at www.abr.gov.au. While an ABN is not compulsory, it will make life easier for you when registering for GST or doing business with other entities. For instance, unless you quote your ABN on your invoices, other businesses must withhold 46.5 per cent from any payment made to you.

There are several taxes that apply to small business owners and these can all be accounted for in your single Business Activity Statement (BAS) which you send to the tax office on a monthly or quarterly basis.  The more common taxes that you are likely to report are GST, FBT and PAYG.  If you lodge a BAS, you will still have to provide the Tax Office with a separate income tax return.  However, if you are a sole trader you must report your business information in your individual tax return.

GST

If your annual turnover is likely to be over $75,000 then you have to register for the Goods and Services Tax (GST).  GST is a 10 per cent tax on most goods and services sold in Australia. When registered you then have to collect the GST on any goods and services you provide and then submit the money to the Tax Office on either a monthly, quarterly or annual basis. Registering for GST also allows you to claim a credit for any GST you pay on purchases for your business. In order to claim you must have a tax invoice. There are two ways of accounting for GST – either on a cash or a non-cash (accruals) basis.  You can use a cash basis if your turnover is less than $2 million a year. Most small businesses pay GST quarterly although you can opt to pay it monthly.

FBT

Fringe benefits tax (FBT) is a tax paid on certain benefits that an employer make to their employees or their employees’ associates in place of or in addition to their salary or wages. Such benefits might be allowing an employee to use a company car for private purposes or paying an employee’s health insurance fees. Some work-related benefits such as laptop computer s and mobile phone primarily used for work are exempt. If you provide fringe benefits, then you need to register for the tax. FBT is based on the taxable value of the various fringe benefits provided. It is charged at 46.5 per cent.  The FBT year runs from March 31 until April 1

PAYG

If you employ staff – including yourself where you are a small business owner although not where you are a sole trader – you have to withhold an amount from the money you pay them and then forward that amount to the Tax Office.  In order to do this you must register for pay as you go (PAYG) withholding which you can do online (www.bp.ato.gov.au) if you have an ABN.

Payroll tax

This is unlikely to impact if you are a start-up business as you have to have an annual payroll bill of at least $600,000 in NSW rising to over $1 million in Queensland and Tasmania.  But if you do face the slug then it varies from state to state with Tasmania the highest at 6.1 per cent although this is offset to some extent by the fact the threshold is $1.01 million per annum.