PAYG is a system for businesses to pay instalments of their expected tax liability on their business and investment income during the financial year. PAYG instalments are usually paid quarterly.

Pay As You Go (PAYG Withholding)

Employers withhold PAYG withholding tax on behalf of the employees. The employees can claim against the amount withheld at the end of the financial year (called tax return).

Business owners may also have to withhold from payments to:

• other workers, such as contractors
• businesses that don’t provide their ABN

From 1 July 2018 and 2019, employers are required to report employees’ payroll information to the ATO each time a payroll is made through a STP-enabled software. Payroll information includes:

• salaries and wages
• pay as you go (PAYG) withholding
• superannuation

Super Stream (employer super guarantee)

SuperStream is the new mandatary way businesses pay employee superannuation guarantee contributions to their super funds electronically in one go via super clearing house/super stream format that offered by many finance institutions and super funds.

Employers are no longer able to contribute super guarantees to the employee’s super account separately as they used to do.

SuperStream transmits money and information consistently across the super system – between (1) employers, (2) funds, (3) service providers and (4) the ATO. The data is linked to the payment by a unique payment reference number.

• employers can make all their contributions in a single transaction, even if they’re going to multiple super funds
• contributions and rollovers can be processed faster, more efficiently and with fewer errors
• employees can view their super payments on MyGov.

Many financial institutes (e.g. banks), most super funds, ATO clearing house and accounting software (e.g. XERO, MYOB, QuickBooks & Payroller) offer super stream services.

Fringe Benefit Tax

Fridge Benefit Tax (FBT) is paid by employers on certain benefits they provide to their employees or their employees’ family or other associates. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.

• FBT is separate to income tax and is calculated on the taxable value of the fringe benefit. The employer must self-assess their FBT liability for the FBT year (that is, 1 April to 31 March) and lodge an FBT return.
• Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages. They are benefits given to employees such as:

• allowing an employee to use a work car for private purposes
• giving an employee a discounted loan
• paying an employee’s gym membership
• providing entertainment by way of free tickets to concerts
• reimbursing an expense incurred by an employee, such as school fees
• giving benefits under a salary sacrifice arrangement with an employee.

The following are not fringe benefits:

• salary and wages
• shares purchased under approved employee share acquisition schemes
• employer contributions to complying super funds
• employment termination payments (including for example, the gift or sale at a discount of a company car to an employee on termination) · payment of amounts deemed to be dividends under Division 7A
• benefits provided to volunteers and contractors
• exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.

Goods and Services Tax (GST)

You must register for GST if you are carrying on a business or enterprise and any of the following apply: your current or projected annual GST turnover is $75,000 or more ($150,000 or more for non-profit organisations), you provide taxi travel, you want to claim fuel tax credits, or you want to claim wine producer rebates. If your annual GST turnover is below $75,000, you can choose not to register for GST.

Where a business is registered, GST at the rate of 10 per cent must be added to the invoiced price of taxable supplies. The supplier collects GST from the customer. Only businesses registered for GST purposes can collect GST.

As a supplier, you may also be paying GST on purchases made to run your business. This can be claimed by way of what are known as input credits. You can account for GST on either a cash basis (when payment is received from customers) or an accruals basis (when customers are invoiced).

At the end of the period (monthly and quarterly options are available), your business will need to account for GST collected on taxable supplies and input credits which are being claimed. The difference between the two will determine the net GST to be paid or refunded. Reporting on this takes the form of a Business Activity Statement (BAS).

Every business needs to have an Australian Business Number (ABN). Businesses registered for GST are automatically given an ABN.

If you do not have an ABN, other businesses may be unwilling to deal with you because they may not be able to claim their GST input tax credits. Where an ABN cannot be quoted, other businesses will be required to withhold tax from payments made to you.
 

Lodging activity statements

Businesses use an activity statement to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Activity statements are also used by individuals who need to pay quarterly PAYG instalments.

CGT is a tax imposed on any gains made on the disposal of an asset. There are special provisions for relief from CGT where the disposal of an asset occurs as the result of restructuring a business into a company. There are also special concessional provisions that relate to the disposal of a small business.

Before you purchase or sell an asset or a business, it is wise to seek professional advice to see if you qualify for any relief provisions. Professional advice can also help you plan ahead and manage your taxation responsibilities.

Your accountant or tax adviser will help you determine any other taxes that might affect you, including:

• Income tax
• Land tax
• Payroll tax
• Stamp duty
• Fringe benefits tax
• Superannuation guarantee levy.

Running a business inevitably involves some paperwork and you must make sure you comply with your tax obligations. By understanding the very basics, you can make this relatively pain free.

Managing invoices, payments and paperwork

When you operate a business, you have transactions where money flows into your business (receipts) and out of your business (payments). These transactions are supported by documents recording the details of the transactions, such as tax invoices, wages records, cheque butts and credit card statements. These documents contain the information you need to record, such as the date of each transaction, total payment or amount received or the amount of GST.

Cash flow is what keeps your business going. A good way to help make sure you have enough cash available at the right time to meet your tax, super and other obligations is to do a cash flow budget. We also have some tips to help you manage your cash flow better.