1. Australia >
2. Expanding a Business >
3. Taxation

Taxation in Australia

What is the taxation like in Australia?

Corporate Tax:

• 30%

Income Tax:

$ 0 - 18,200 Nil
$ 18,201 - 37,000 19c for each $ 1 over 18,200
$ 37,001 - 80,000 $ 3,572 plus 33.5c for each $ 1 over $ 37,000
$ 80,001 - 180,000 $ 17,457 plus 37c for each $ 1 over $ 80,000
$ 180,001 and over $ 54,547 plus 45c for each $ 1 over $ 180,000

How does the taxation system work in Australia?

First of all you will have to decide what sort of 'structure' your business is:

Sole trader

• one person is controlling and managing the business
• tax is paid by the sole trader on the business income
• an individual tax file number is used
• you may apply for an ABN and use this number for business dealings
• the tax rates are the same as for individuals
• you must register for GST if turnover is more than $75,000

Partnerships

• an association of people who work together as business partners / receive joint income
• a partnership needs its own tax file number
• you may apply for an ABN
• the partnership does not pay tax - the individual partners pay tax on their own share
• a partnership must, however, submit an annual partnership tax return to show income, expenses, and each partners share of the profits
• individual partners pay PAYG on their individual shares
• must register for GST if turnover is more than $75,000

Company

• a company is a separate legal entity - so its income and tax liability is separate from the people working there
• the company must have a tax file number
• a registered company is entitled to an ABN
• the company must lodge an annual tax return
• If PAYG is paid - it is credited against income tax liability
• A company must be GST registered if annual turnover is $75,000 or more
• GST registration and tax file numbers can be applied for on the ABN application

What sort of registrations will I have to complete for taxation in Australia?

You will probably need to apply for an ABN (Australian Business Number), a Tax File Number, as well as registering for GST and PAYG.

What's an ABN?

An Australian Business Number is an 11 digit number which identifies a business with the Tax Office, other Government Departments, and other businesses. Not everyone is entitled to an ABN. Individuals not running a business (such as employees) don't need one. Registered Companies are entitled to an ABN.

You need an ABN as well as GST registration to claim GST credits. If you supply goods or services you need an ABN so other businesses don't withhold tax at the top rate (46.5%) when they pay you.

What's GST?

Goods and Services Tax - a bit like VAT in the UK. It's 10% added to the selling price / market value. You have to register for GST if your annual turnover is more than $75,000, or you can register voluntarily. If you are registered you will add 10% to the price people pay for your service/product. This extra 10% is paid to the government - but you can claim against this any GST you have paid to suppliers. It is the consumer who pays GST.

Registering for GST can be done at the same time applying for your ABN. It can be done electronically on the internet, by filling in forms ordered from the Tax Office, or through your accountant.

There are two ways of accounting for GST:

• Cash basis - you pay/claim GST in the same period as you pay/receive the money. Use this method if annual turnover is less than AU$2 million.
• Non-cash basis - you pay/claim GST in the period you receive/send the invoice or you make/receive any part payment.

When do I pay/file my GST returns?

To a certain extent it depends on what you prefer; either monthly, quarterly or annually.

• Monthly - obligatory if annual turnover is more than AU$20 million
• Quarterly - if annual turnover is less than $20 million
• Annually - if you are voluntarily registered for GST (i.e. you are earning less than $75,000 p.a.)

What is PAYG?

Pay as You Go is a tax you take off anything you pay to employees, and in general, directors (sometimes contractors as well). You then send this money to the Tax Office. Tables showing how much to take off are available on the Australian Tax Office website.

What is a Tax File Number?

A number issued by the Tax Office to individuals and businesses. Partnerships, companies and trusts need their own TFN. You can get a number at the same time as getting your ABN.

Click here to Ask an Expert about Taxation in Australia