The following is a checklist for information required to prepare income tax returns for this year. Please ensure that you review the checklist and have all information available when completing your tax returns.
The Australian Business Number (ABN) is a single identifier used for all dealings with the Australian Taxation Office and other business entities and agencies.
If you are a business registered for GST you need to lodge a business activity statement (BAS). The business activity statement (BAS) is a form submitted to the Australian Taxation Office by all businesses to report their taxation obligations.
Capital Gains Tax (CGT) is not really a separate tax but is what you need to include on your income tax return for any net capital gain incurred in a financial year for a Capital Gains Tax event which can include compulsory acquisitions, forfeited deposits, etc.
Goods and Services Tax (GST) is a tax of 10% in Australia on most goods, services, and other consumables. If you are a registered business, you need to charge GST on most goods and services you sell or supply. You must be a registered if your business turnover exceeds $75,000 per annum or $150,000 for a not-for-profit organization but you may elect for voluntary registration if you are below the threshold.
Income tax is levied on taxable income. Taxable income is calculated as [assessable income] less [any allowable deductions]. Deductions include wages, cost of stock, rent, bad debts, and previous year losses. Sole traders are not required to complete a separate return for their business.
Buying and negatively gearing an investment property is a well established practice in this country with approximately 30% of residential properties now owned by investors. Many of our clients have successfully grown their wealth using this long term, tax effective strategy but we have also seen some financial disasters.
Pay As You Go (PAYG) instalments is a system for paying instalments during the income year towards your expected tax liability on your business and investment income. Your actual tax liability is worked out at the end of the income year when your annual income tax return is assessed. Your PAYG instalments for the year are credited against your assessment to determine whether you owe more tax or are owed a refund.
Starting or buying a business necessitates risk, research, passion and planning. Just like a game of chess, to succeed you need to make the right opening moves. The harsh reality is that enthusiasm, money, talent or a great idea is not enough to guarantee success in business. There is an old saying, 'people don't plan to fail, they just fail to plan.' This is both valuable advice and a warning for people intending to start a business.
Just as evolution in animals dictates that only the fittest survive, in a recession it is generally survival of the smartest. In this country we seem to have a recession-like economy happening every seven to nine years and almost 75,000 Australian businesses were wiped out in the last downturn.