6 IMPORTANT Tax Differences Between a Sole Trader and a Company by YS

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If you are thinking to start a new business, you will need to decide on structure. Will you operate as a sole trader or will you establish a company?

Below is a summary of some common queries regarding the differences between operating as a Sole Trader or a Company.

This information is taken from the www.business.gov.au website and is current as of 24 May 2018.

For more information, please feel free to contact us on 0481 309 696 or email: admin@simprotax.com.au .

Tax differences between a sole trader and a company

Question Sole Trader Company
What is the tax-free threshold?

 

 · $18,200 for sole traders (individuals) in the 2016-17 income year.

· It changes from time to time so check the individual income rates.

 ·  There is no tax-free threshold for companies in the 2016-17 income year.
What are the tax rates for income? ·  Sole traders pay tax at the individual income rate.

· Tax-free threshold is $18,200.

 

 · The company tax rate is currently 30%. From 1 July 2016, the company tax rate for small businesses with an aggregate turnover of less than $10 million is 27.5%.

 

· No tax-free threshold for small business and companies.
What small business concessions are available? · discount on Capital Gains Tax (CGT)

· income tax concessions

· GST and excise concessions

· Pay As You Go (PAYG) instalment concession

· fringe benefits tax (FBT) concessions

 · no discount on Capital Gains Tax (CGT)

· income tax concessions

· GST and excise concessions

· Pay As You Go (PAYG) instalment concession

· fringe benefits tax (FBT) concessions
What type of tax returns need to be lodged? · Individual tax return  needs to be lodged each year.

· Business income and expenses go in your individual tax return using a separate business schedule – you do not need to lodge a separate return for your business.

 

 · Separate company tax return needs to be lodged.

· You must also lodge your own personal return as an individual for income you earn via wages, shares, dividends or loans received from the company or any other sources of income.

· If you are a director of a company or trust, benefits you receive may be subject to FBT. You must lodge an FBT return if you have a liability during an FBT year (1 April to 31 March).

· Must also lodge return of any associated company trusts.
What business taxes and superannuation will I need to pay and report? Business taxes and superannuation are not based on your business structure, but the activities of the business.

You may need to register for taxes such as:

  • Goods and services tax (GST)
  • Pay As You Go (PAYG) instalments

If you have employees you will also need to:

  • Make Pay As You Go (PAYG) withholding payments 
  • Make Super Guarantee (SG) contributions 

Consider if you need to pay fringe benefits tax (FBT) instalments. This is only required if employees receive a fringe benefit.  Check out the Australian Taxation Office’s (ATO) website for more on the types of payments that incur FBT.

 
When do I have to pay Goods and Services Tax (GST)? · For both a company and a sole trader, you must register for GST if your turnover is $75,000 or more.

 

If it is below this amount it is optional to register.
When do I have to pay payroll tax? Payroll tax is regulated by the state governments and therefore each state is different.

 

Single Touch Payroll – By Grace Teyo

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Single Touch Payroll or STP is a reporting change for employers. It is a new and simpler way to report employee’s payroll information.

STP is mandatory from 1st July 2018 for employers with 20 or more employees. It will be expanded to all other employers with 19 or less employees from 1st July 2019. In which, subject to legislation being passed in parliament.

To work out whether businesses need to be STP-ready, employers will need to conduct a headcount of employees back to 1st April 2018. However, it will be voluntary for employers with 19 or less employees to adopt a STP solution at this time.

Employee headcount includes:

  • Full time employees
  • Part time employees
  • Casual employees
  • Seasonal employees
  • Overseas based employees

Doesn’t include:

  • Employees who ceased work before 1st April 18
  • Independent contractors
  • Staff employed under a third-party labour hire agreement
  • Company directors *
  • Office holders *

Religious practitioners *

*Company directors, office holders and religious practitioners should not be included when determining the number of employees. However, when reporting started, their payment information will need to be reported.
As a result of Single Touch Payroll or STP, employers will no longer be required to complete payment summaries at the end of the financial year as it will have already been done and available to employees through MyGov / ATO Pre-filing report.

How to report?

  • Report from using existing payroll solution that is STP-ready
  • Report from new payroll solution that is STP-ready
  • Ask a third party (registered tax agent or payroll services provider) to submit on your behalf.

For more information / software installation in regards to single touch payroll, please contact our office for more information.

9 main reasons you should use Simpro Taxation Services as your tax agent!

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Save time

With a minimum fee of $75, your tax return can be done as quickly as within 30 minutes to one hour. Doing it yourself may take a few hours or more.

Affordable fees
At Simpro Taxation Services, we offer tax payers a reasonable, affordable fee without compromising the quality of service. With a minimum fee of $75, you will get a professional, yet a simple process for preparing your tax return.

Stress free/ peace of mind

Not sure you are eligible to claim expenses or not? Or worry that you may overlook deductions or tick the wrong boxes? Hand it over to the professional, make it simple and get it done quickly.

Deductions that you might not be aware of

At Simpro Taxation Services, we will make sure we never miss a claim that is eligible to you. As we promise, we will “maximise your tax return legally”.

Avoid trouble

The last thing we want is the ATO chasing you up due to providing wrong / incorrect information. A professional registered tax agent will make sure that your tax return is compliant with the laws and maximize your refund legally.

Let the professional speak to ATO

At Simpro Taxation Services, we can also represent our clients when dealing with the ATO. Simply let the professional speak to the tax man, easy!

More time to lodge

The 31st October submission deadline does not apply to a person who is using tax agent services from Simpro Taxation Services. It means more time to prepare, better cash flow planning and the best part is … no late penalty from the ATO for failure to lodge before 31th October.

Build a good relationship

Seeing the same tax agent every year will enable the tax agent to have a thorough understanding of your financial situation and can provide the best tax advice tailored to you. Last but not least, it is always good to have a friend who is a tax accountant.

Up-to-date with the latest tax laws

Not sure whether the latest tax ruling or tax law apply to you? With extensive tax knowledge, Simpro Taxation Services will keep you up-to-date with the latest tax ruling and tax law that are relevant to you.