What is Company Tax?
A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities.
Most businesses operating in Australia will pay income tax, but not all will pay company tax rates. Any business that is considered a ‘company’ (that is, a distinct, legal entity that submits its own tax returns) will be liable for company tax rates.
How to Pay
Company tax is assessed and calculated by the Australian Taxation Office through an annual tax return. Many businesses will also need to register for the PAYG (pay as you go) system. Under PAYG, you will make regular payments towards your annual income tax bill. This reduces the amount you have to pay after submitting your yearly tax return. If you do pay PAYG instalments, you will still need to submit an annual income tax return.
How Much to Pay
There is no tax-free threshold for company tax, which means that most of a company’s income is taxable. The portion of a company’s income that can be taxed is known as ‘assessable income’; it is calculated by deducting allowable expenses from total income. Assessable income does not include GST collected on sales.
In the 2018-2019 tax year, the full rate for company income tax is 30%; however, many small businesses will only pay a rate of 27.5%. This 27.5% rate applies to ‘base rate’ entities, which must have a turnover of less than $25 million and earn 80% or less of their income through ‘passive income’, which covers things such as capitals gains, royalties, rent, and interest.
When to Pay
A company has from 1 July to 31 October to lodge your tax return for the previous income year. To lodge your tax return you can: lodge online with myTax through myGov – this is the easiest and quickest way to lodge. If you lodge through a registered tax agent, they'll tell you when they will lodge your tax return.
"The taxpayer: that’s someone who works for the federal government, but doesn’t have to take a civil service examination."-Ronald Reagan
Features of Company Tax Return:
Documentation
Compile income, expenses, and other relevant financial information
Filing
Filed with a tax agent is recommended by ATO
Tax Liability
Pay your required tax amount to the authority in due time otherwise there will be fine
Tax Deductions
Company can claim tax deductions for most costs involved in running business. This helps to reduce the income a company pays tax on. Find out what expenses a company can claim, when to claim, and the records a company needs to keep.
Company Tax Rate
An Australian resident company is subject to company tax, at a rate set by the Australian Government. A non-resident company is taxed on its Australian source income at the same rate as a resident company.
Capital Gains Tax
Capital Gains Tax (CGT) applies on any capital gain made through the disposal of assets. It is paid as part of income tax.
Foreign Entities
Foreign entities may be subject to CGT on assets acquired and used in carrying on a business in Australia. Businesses are required to keep records upon acquiring assets that may be subject to CGT in the future.
GST for Business
Most businesses are required to register for GST with the Australian Taxation Office. Businesses which have paid for business supplies inclusive of GST are entitled to claim an equivalent input tax credit. Certain businesses may also be eligible for GST concessions.
Extensive Documentation
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