Running a business means navigating a range of responsibilities, including tax planning. Understanding how taxes work (and how to prepare for them) can help you avoid costly mistakes and make the most of every financial year. Here’s a practical guide to get you started.

Types of Business Taxes in Australia

Depending on your business structure and turnover, you may be liable for several types of taxes – and knowing which ones are relevant to your situation is the first step in effective planning. Here are some of the taxes that Australian business owners should be aware of:

• Income Tax: Companies are taxed a flat rate on their income (either 25% or 30%).
• GST (Goods and Services Tax): If your business earns $75,000 or more annually, you must register for GST and charge 10% on most goods and services.
• PAYG (Pay As You Go): There are two types of PAYG obligations. PAYG Instalments requires you to pre-pay your income tax in installments throughout the year, rather than a large bill at tax time. It applies to businesses/individuals who expect to owe a substantial amount of tax at the end of the year. The ATO may enter you into this system automatically, or you can volunteer. PAYG Withholding applies to anyone with employees, and requires you withhold tax from employee wages and remit it to the ATO on their behalf.
• Fringe Benefits Tax (FBT): Applies if you provide certain perks to employees, like cars or gym memberships.
• Capital Gains Tax (CGT): When you sell assets such as property or shares for a profit, CGT may apply.
• Payroll Tax: A state-based tax on wages, payable when your total payroll exceeds a certain threshold (varies per state). In Victoria, as of 1 July 2025, the annual threshold is $1,000,000, with a monthly threshold of $83,333. The standard payroll tax rate is 4.85%.

Common Tax Terminology Explained

To help make sense of the most common terms you’ll encounter, here’s a straightforward guide to some essential tax terminology.

• ABN (Australian Business Number): A unique identifier for your business.
• BAS (Business Activity Statement): Used to report GST, PAYG, and other taxes.
• Taxable Income: Your total assessable income minus allowable deductions.
• Deductions: Legitimate business expenses that can reduce your taxable income (e.g. rent, equipment, travel).
• Instant Asset Write-Off: A scheme that allows eligible businesses to claim the full cost of certain assets upfront.
• Small Business Entity: A business, together with businesses linked to it, having an aggregated turnover of less than $10 million, often eligible for tax concessions.

Mistakes to Avoid

Whether it’s due to poor record-keeping or misunderstanding obligations, tax slip-ups can cost time, money, and peace of mind. Some common oversights include:

• Mixing personal and business expenses: Always keep separate accounts.
• Not putting aside money for tax (especially if you’re a sole trader or contractor): Set aside at least 25–30% of income for tax obligations. Did you know the ATO has calculators and tools to help you estimate your tax?
• Missing BAS or tax deadlines: Leads to penalties and interest charges.
• Overclaiming deductions: Can trigger an ATO audit.
• Not understanding your obligations as you grow: As your business changes, so do your tax requirements.

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Read More: Common Tax Mistakes Businesses Should Avoid in Australia

Why Tax Accountants Are Important

While some business owners manage their own tax using accounting software, most benefit from partnering with an experienced tax accountant. At The Co., our business tax experts can help you understand your obligations, stay compliant, and structure your business effectively. We can also prepare and lodge your BAS and tax returns, identify tax-saving opportunities, stay on top of legislative changes, and make informed decisions on areas such as reinvestment and asset purchases.

Remember, the best advisor is a proactive one; someone who doesn’t just lodge your returns, but who also helps you plan ahead. With the right guidance and habits, you can reduce stress, avoid ATO scrutiny, and set your business up for financial success.