Your tax guide for starting a business

Your tax guide for starting a business

You didn’t found your company so you could do more tax. But you do need to get a handle on your obligations so we’ve put together this tax guide for starting a business, covering tax returns, GST and PAYG.

What tax returns does your business need to lodge?

Even in the beginning, you are likely to have three tax returns each year:

  • One for your company*
  • One for your family trust*
  • One for you, personally (as a startup founder)

*Maybe you don’t want to set up a company and family trust? We really recommend it for a heap of reasons. You can read why here.

If your company’s financial year ends on 30 June, your tax returns need to be lodged and any associated tax needs to be paid by 15 May the following year.

How does GST work and when is it due?

By law, you have to register for GST once your business’s annual revenue reaches $75,000.

It’s often worth registering before then so you can claim GST back on business purchases.

Once you register for GST, you have to lodge quarterly Business Activity Statements (BAS). They’re usually due on the 28th of the month after the quarter ends (e.g. BAS for the July-September quarter is due on 28 October).

This is when you’ll also pay any GST you owe or receive cash back from the ATO – it depends whether you paid more GST than you earnt or vice versa. For example:

  • If you received $1000 in GST from sales and paid $2000 in GST on purchases, you should receive $1000 from the ATO
  • If you received $1000 in GST from sales and paid $500 in GST on purchases, you should owe the ATO $500

How does PAYG withholding work and when is it due?

PAYG (pay-as-you-go) withholding is tax you hold back from your employees each pay cycle, so it can be paid to the ATO. Like all things tax, it involves a few steps:

  1. Register as a PAYG withholder with the ATO
  2. If you’re using software like Xero for payroll, it will calculate how much tax you need to hold back from each employee
  3. Pay the PAYG withheld amount to the ATO on time, either:
    Quarterly, with your BAS if you are withholding under $25,000 in total PAYG for the financial year
    OR
    Monthly, via an Instalment Activity Statement (IAS) if you’re withholding $25,000 or more in total PAYG for the financial year. IAS are usually due on the 21st of the following month
  4. Provide annual payment summaries to employees by 14 July after the end of the financial year (if your financial year ends on 30 June)
  5. Lodge employee payment summaries with the ATO by 14 August

Other taxes to be aware of

Once your company’s payroll reaches about $47,000 per month, you’ll likely be up for state-based payroll taxes.  You might also have to pay PAYG income tax instalments

I need more than a tax guide for starting a business

We know, tax can really suck – your time, your energy, your will to live.

A startup savvy accountant can handle all your obligations, saving you money wherever possible.  We’d love to discuss it with you.  And you might also want to check out our 7 tax Qs for starting a business post.  It will well and truly set you on the right tax track. 

Image by Porapak Apichodolik on pexels.com

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