Find corporate tax questions and answers below:
A company is a separate legal entity and can incur debt, sue and be sued. You can set up a company as a private or public entity. A company is owned by shareholders and usually managed by directors. Under this structure, the shareholders can limit their liability and are generally not liable for the company’s debts.
You must register for GST if your company or business:
- annual turnover is more than $75,000; or
- a Non-Profit Organisations and your annual turnover is more than $150,000
- when you start a company or business and expect your turnover to reach the GST threshold (or more) in the first year of operation
The amount of income tax your company has to pay depends on the company’s taxable income.
The equation of Taxable Income = Assessable Income – Deductions.
This is one of the top most corporation tax questions. A company incur a flat tax rate of 30% unless they qualify as a base rate entity. Companies with a turnover of less than $25m may qualify as a base rate entity and would currently be taxed at 27.50%.
Many tax concessions can be made, but that can become incredibly complex.
Personal services income (PSI) may also be applied if the company receives an income from personal skills, efforts, or expertise.
A base rate entity is a company that both:
- has an aggregated turnover less than $50 million from 2018–2019 ($25 million for 2017 –2018.
- 80% or less of your assessable income is base rate entity passive income (for example interest, dividends or rent.
This is the most common corporation tax questions we get asked by clients, a company is not entitled to the tax-free threshold and must pay tax on every dollar of taxable income.
Company assessable income includes all gross income (before tax) from your everyday business activities (sales etc.) as well as other income that is not part of your everyday business activities, including changes in the value of the trading stock, capital gains, isolated transactions intended to make a profit, and cash prizes for your business. For detailed information please visit the ATO website.
It does not include GST payable on sales you make, or GST credits
Company tax deductions are amounts you can claim for expenses involved in running your business. Go to the ATO’s business deductions information for details about what, when and how you can claim your deductions.
When your company or business and investment income reaches a certain amount, you’ll pay your income tax in instalments. These payments are usually quarterly. This helps you to avoid a large tax bill after you lodge your tax return.
If you’re a company and business with an annual turnover of less than $10 million in gross income, you may be able eligible for small business tax concessions.
As an employer, you are required to collect (withhold) Pay as You Go (PAYG) withholding amounts from payments you make to:
- your employees
- other workers, such as contractors, that you have voluntary agreements
- businesses that don’t quote their ABN – Australian business number
- The withholding amount can be found on the ATO Tax Table via
Generally, if you pay an employee $450 or more before tax in a calendar month, you must pay super on top of their wages. The minimum you must pay is called the Super Guarantee (SG), currently, the SG is 9.50% of an employee’s ordinary time earnings.
