A good small business accountant saves you money by planning tax before year end, choosing the right structure, claiming every legitimate deduction, improving cash flow, and helping you avoid costly mistakes and penalties. The savings from proactive advice usually far exceed the fees you pay.

Firstly, we’ll cover the importance of tax planning. Secondly, we will discuss how a robust business strategy can grow your business. Lastly, we will delve into the importance of having a trusted network of professionals to support you on your business journey. These elements are interconnected and can significantly influence your business’s success.

Utilizing a small business accountant effectively can significantly enhance your financial strategies.

Your small business accountant can guide you through the complexities of tax regulations.

Tax Planning with Your Small Business Accountant

Partnering with a small business accountant enhances your understanding and management of financial matters.

Small business accountants possess an in-depth understanding of how to utilize different trading structures. Your small business accountant will ask tailored questions to determine the best structure for your unique situation. For instance, whether a sole proprietorship, partnership, or corporation fits your long-term goals can significantly impact your tax obligations and overall financial health.

A small business accountant can help identify where reinvestment can lead to increased business efficiency.

Engaging a small business accountant allows for customized strategies that fit your business needs.

Consult your small business accountant today to explore how proactive planning can benefit your financial future.

Your accountant will also have comprehensive knowledge of the various tax rates applicable to different trading entities. This expertise allows them to explain the implications of these rates in the context of your business, ensuring you are fully informed about your obligations and opportunities.

With insights from your small business accountant, your business strategy can reach new heights.

This process, known as Tax Planning with your small business accountant, can save you a significant amount of money. By applying legal avenues to minimize your tax liability, you can reinvest these funds into the business, enhancing growth potential. For example, reallocating saved tax funds into strategic marketing campaigns can elevate your brand’s visibility.

Your small business accountant can provide effective recommendations tailored to your objectives.

With these savings, you can reinvest in your business through advertising, purchasing new manufacturing equipment, or expanding your product line. This reinvestment can lead to increased revenue, which will, in turn, boost your overall business profit. Consider the long-term benefits of each investment decision and how they contribute to your growth trajectory.

As Chartered Tax Advisors, we have cutting-edge tax and business knowledge. Our proficiency allows us to cut through the complexities of tax regulations and provide you with clear, actionable advice. We understand that every business is unique, and we tailor our strategies to fit your specific circumstances.

As a result, we are able to save you money on tax and help you grow your business. Our clients have seen firsthand the benefits of proactive tax planning. Why wait? Call us today for a confidential, obligation-free initial consultation. Take the first step towards financial empowerment.

Business Strategy with Your Small Business Accountant

A CPA brings a wealth of commercial understanding of the market. This extensive knowledge is not just theoretical; it translates into practical advice that can help steer your business in the right direction. A good accountant will analyze your current position and help you navigate potential challenges.

This understanding of the market can be broken down into the following seven key areas where the accountant can assist you:

1. Establishing your why
2. Market Analysis
3. S.W.O.T Analysis
4. Marketing Plan
5. Unique Selling Proposition
6. Best trading Structure
7. Connecting you with other professionals

Trusted Network

Establishing your why: Understanding your purpose can guide every decision you make.

Market Analysis: Your accountant can help identify trends and opportunities in the market, ensuring you stay ahead of competitors.

S.W.O.T Analysis: This framework allows you to evaluate your business’s strengths, weaknesses, opportunities, and threats, creating a strategic plan for success.

Marketing Plan: A well-defined marketing strategy is essential for attracting and retaining customers.

Unique Selling Proposition: Clearly defining what sets you apart from competitors can enhance your appeal to customers.

Best Trading Structure: Choosing the optimal trading structure can maximize tax benefits and protect your assets.

Connecting You with Other Professionals: Building a network of support can lead to new opportunities and insights.

Having a small business accountant in your corner helps you navigate through market complexities.

Your small business accountant works with a diverse range of professionals. Thus, they can connect you with experts in various fields, enhancing your business’s support system. This network can provide invaluable insights and resources.

• Commercial Lawyers
• Family Lawyers
• Marketing professionals
• Conveyancers
• Financial advisors
• Auditors
• Finance Brokers
• Mortgage Brokers
• Bookkeepers

Above all, your accountant can connect you with the right professionals who match your unique needs and personality type. This personalized approach to networking can lead to stronger business relationships and more significant opportunities for growth.

Commercial Lawyers: Essential for navigating contracts and legal frameworks.

Family Lawyers: Important for personal legal matters that can impact your business.

Marketing Professionals: Experts who can help you design and implement effective marketing strategies.

Conveyancers: Vital for any property transactions related to your business.

Financial Advisors: They can provide insights on managing investments and pensions.

Auditors: Important for ensuring compliance and accuracy in your financial practices.

Finance Brokers: They can assist in finding the right funding options for your business.

Your small business accountant facilitates connections that are vital for your business’s growth.

Mortgage Brokers: Helpful for acquiring property to grow your business.

Bookkeepers: Crucial for maintaining accurate financial records.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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Australian residents pay income tax at progressive marginal rates: nil on the first $18,200, then 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that for 2025-26, plus the 2% Medicare levy. Understanding the brackets helps you plan income, deductions and tax more effectively.

The tax rates for an entity in Australia will be different depending on the type of entity used.

We will go over the rates for the most often used structures.

Entities

We will review the following 7 entities:

1. Individual
2. Partnership
3. Company
4. Discretionary or family Trust
5. Unit Trust
6. Self Manager Superannuation Fund (SMSF)
7. Joint Venture

Individual tax rates

Individual rates tend to be different each year. For the 2021 financial year, the rates were:

These may also need to be paid:

• Medicare Levy (ML); and
• Medicare Levy Surcharge (MLS)

The Medicare Levy rate is 2%

See the table below for the MLS rate:

The thresholds above increase by $1,500. This is to say, for each dependent child after your first kid.

Click here to check the historical individual rates.

Click here to check the historical MLS rates.

Partnerships

A partnership needs to complete a tax return. With that said, the partnership does not itself pay tax. In addition, the partners pay tax if applicable. In other words, if the partner is an individual then they will pay tax. Whereas, if the partner is a trust then the trustee or the beneficiary of that trust is likely to pay the tax.

Company Tax Rates

The company is the most used business entity.

As a result, the rate for a trading company, which is a based rate entity, in the 2022 financial year is 25%. However, if the company is not trading and is not a base rate entity, then the rate is generally 30%.

Subsequently, To learn more about establishing a business click here.

Also, you can check the company rates now by going to the ATO website which speaks more about Changes to company rates.

Discretionary Trust/Family Trust

This entity is not taxed if the beneficiaries are entitled to all the income of the trust. Consequently, If this is not the case, the trustee will be taxed at the highest individual marginal rates.

In addition, the trustee will pay the MLS.

Unit Trust

The ATO does not assess this type of entity. Therefore, unit holders may have to pay tax depending on the type of entity they are. That is to say, the unit holder may be a discretionary trust with one individual beneficiary. As a result, the individual beneficiary will be taxed but not the discretionary trust.

Likewise, a partnership unit holder will not pay tax either but the partner’s will pay tax if they are a company, self managed superannuation fund or individual.

Joint Venture

The tax authorities don’t tax joint ventures. Further, members must avoid receiving income jointly for this to take place. For example, receiving income jointly is raising an invoice as the joint venture.

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Understanding various tax rates and how the array of entities work together to reduce tax is complex.

Contact us if you require assistance. We offer you a initial consultation to see how we can support your big vision.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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When starting or growing a business, the key tax considerations include choosing the right structure, registering for an ABN and GST, understanding your income tax and PAYG obligations, planning for super and employees, claiming deductions, managing cash flow for tax, and getting proactive advice. Getting these right early saves significant tax and stress.

This article is designed to articulate a high-level general overview of some of the most important tax considerations for those in business and entrepreneurship. The article is not comprehensive in nature and professional advice should be sought to ensure correct application of issues mentioned where required.

Topics Covered

• Hobby or Business
• GST Threshold
• Motor Vehicle Cost limit
• GST on Motor Vehicles
• Payroll Tax
• Superannuation
• Award Rates
• Fringe Benefits Tax (FBT)
• Single Touch Payroll (STP)
• Division 7A

1.   Hobby or Business

A hobby can be considered a business where a profit-making intention can be established, where profit has been made or the acts of a person show there is intent to operate as a business.

The following factors may indicate that a profit-making intention and business exist:

• Registration of a business name
• Obtaining an Australia Business Number (ABN)
• You make a profit
• Repetition of business activities
• The size or scale of the activity is parallel with the activities of other businesses in your industry
• The activity is planned, organised and executed in business like fashion.

The indicators that an activity is planned, organised and executed in business like fashion may include:

• Keeping business records and account books;
• Having a separate business bank account;
• Operation from business premises; and
• In possession of licences and qualifications.

Worth noting is that an activity can begin its life as a hobby and morph into a business. An example is where an individual acquires an SLR Digital camera and proceeds to take photos at events and posts such photos on social media. Such photos receive praise from their viewers and the individual realises they have a natural flare and affinity for photography. They are encouraged to start a business. The individual decides to do just that and begins to plan. From this instant, it could be established the individual has left the territory of photography being a hobby to the pursuit of photography as a business.

Where the hobby has become a business and the activity is generating a loss, you may be able to offset the business loss against your salary and wage income for tax purposes subject to meeting the non-commercial business loss tests. The non-commercial business loss tests are complex and discussion thereof is outside the bounds of this article. You should seek the advice of a qualified tax agent in this regard before applying such tests. 

2.   GST Threshold

The Goods and Service Tax (GST) is a tax payable by the end consumer (other than businesses not registered for GST). Businesses with turnover in excess of $75,000 must register for GST.

Not for profit organisations which provide products or services must charge GST where their turnover is greater than $150,000.

Some businesses are GST exempt, such as those providing medical services and do not need to register for GST. This means they do not include GST in the fees they charge their patients.

However, registering for GST allows such businesses to claim GST credits on items and services they use to conduct their business.

3.   Motor Vehicle Cost Limit

As per the Australian Taxation Office’s definition, a motor vehicle means a motor-powered road vehicle and does not include a road vehicle where the following apply:

• The main function of the vehicle is not related to public road use; and
• The vehicle’s ability to travel on a public road is secondary to its main functions.

Examples of vehicles meeting the above definition include but are not limited to:

• Trucks, tractors and earth moving equipment.

Vehicles purchased are subject to a Motor Vehicle cost limit of $57,581 for the 2019/2020 financial year. This means vehicles purchased above this limit will have deductions, which may cover numerous years, limited to the above-mentioned figure.

This figure is regularly indexed and should be checked each year by referring to ATO guidelines.

4.   GST on Motor Vehicle Cost Limit

If your business is registered for GST, you may be eligible to claim GST credits equal to one eleventh of the Motor Vehicle cost limit.

This usually translates to $5,234.

Other business assets are not subject to this limit and therefore the full GST credits applicable can be claimed.

5.   Payroll Tax

Payroll tax is payable by employers where their payroll exceeds either a monthly or annual threshold provided by each Australian state and territory.

The website below mentions the payroll tax thresholds and percentage rates applicable for each state and territory.

https://www.payrolltax.gov.au/harmonisation/payroll-tax-rates-and-thresholds

6.   Superannuation

Superannuation is required to be paid for each employee where that employee earns $450 or more per calendar month.

The minimum superannuation payable is an additional 10.00% of the wage or salary paid. This should be stipulated in the contract with the employee. Generally, employers combine the salary, wages and superannuation as a total remuneration package offered to their employees.

See link below for table of rates and years to which they apply.

https://www.ato.gov.au/rates/key–superannuation-rates-and-thresholds/?page=22

7.   Award Rates

Certain employee pay is subject to minimum pay rates prescribed by Fair Work Australia. Paying employees in industries such as the hospitality industry below these rates is illegal. To determine the applicable rates for your employees based on the industry in which you operate, navigate to the below mentioned link and search for your industry.

https://www.fairwork.gov.au/

8.   Fringe Benefits Tax (FBT)

Fringe benefits tax is payable at a rate of 47% by employers on benefits provided to employees or the employees associates. This is the case even if the benefit is being provided by an external provider under an agreement with the employer.

These benefits could be the ability to use a company car for the employee’s private purposes or paying for an employee’s holiday. FBT is a complex area of tax and professional advice should be though if you are considering providing benefits to your employees.

9.   Single Touch Payroll (STP)

STP is a new way to report employees’ tax and superannuation information to the ATO. This information is now reported every time a business runs its payroll. This is a standalone process to preparing the Monthly Pay As You Go Withholding statements and the monthly Business Activity Statements where applicable.

As of 30 September 2019, all businesses which employ staff must be registered for STP and report the information to the ATO.

You can navigate to the ATO website using the link below to check out the no cost or low cost platforms available to satisfy the STP reporting obligations.

https://softwaredevelopers.ato.gov.au/no-cost-and-low-cost-solutions-single-touch-payroll

When considering which provider to choose, it is important to determine if such programs integrate with other business systems to ensure a streamlined no fuss solution is implemented.

10.   Division 7A

Where using a company structure in your business then you need to be cognisant of Division 7A of the 1997 Income Tax Assessment Act.

A company is a separate legal entity and stands alone from its directors and shareholders. As such, any income generated by the entity must be provided to shareholders and directors via declaration of a dividend.

Where profits in the form of drawings are taken out of the company without a dividend being declared, Division 7A is triggered and may deem this to be a dividend to which the benefit of possible attached franking credits (also known as imputation credits) is disregarded. This is a disadvantageous spot to be in. Division 7A is another complex area of taxation for which further advice should be thought. 

Conclusion

As can be seen, the above information provides a broad overview of various tax considerations when operating a business. The ATO website is a good resource to use to find out more. Another great website to visit to learn more about money and business is the Australian Securities and Investment Commission’s (ASIC) Money Smart website.

Questions? Fill out the form below and we’ll reach out to you.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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