Are you too embarrassed to ask you accountant questions that you think every business owner should already know?

This quick article is to let you know about the most common obligations.

It’s so simple, I don’t think any accountant would bother explaining these things to you - but I’ve noticed a lot of people are confused in these areas and that’s not the best frame of mind to be in when you’re trying to make important business decisions.

This is very general so get in touch for specific information or visit the ATO website.

GST

Most goods and services sold or consumed in Australia are subject to 10% goods and services tax, or ‘GST’.

A typical business is required to register for GST if the annual turnover (revenue) is of $75,000 or more (or looks like it will be at that level).

If you pay GST on items purchased for your business, you can claim a GST credit.

The GST you pay to the ATO = GST on Sales LESS GST on Purchases.

All purchases over $82.50 need to be issued a tax invoice and you need to retain these in order to claim the GST credit.

Make sure you include GST in all your sale prices.

The GST is reported and paid to the ATO in the Business Activity Statement (BAS), which is usually quarterly.

BAS

BAS or Business Activity Statements are used to:

report and pay the GST your business has collected
claim GST credits
report and pay other taxes (some are discussed below)

BAS is usually quarterly but depends on circumstances. Lodge and pay your BAS on time to avoid potential interest charges and penalties. TIP: reserve cash for your upcoming BAS.

PAYG instalments

Pay as you go (PAYG) instalments is a system for making regular payments towards your expected end of year income tax liability.

When you’re a new entity you won’t be paying PAYG instalments.

Once you have paid income tax via a tax return the ATO will probably enroll you into the PAYG instalment system. This means you’ll now be ‘pre-paying’ your income tax for the next tax return.

You report and pay your PAYG instalments on your BAS.

Your income tax assessment takes into account the instalments you've paid through the year so you either need to pay the difference or get a tax refund.

Continue reading if you’re an employer…

PAYG Withholding Tax

As an employer, you have an obligation to withhold tax from your employee’s pay.

Contractors can be deemed employees for the purposes of PAYG Withholding Tax.

The amount of PAYG Withheld is reported and paid to the ATO in your BAS.

If you fail to comply with the PAYG withholding obligations for a payment to a worker, you may not be entitled to a deduction for that payment and penalties may also apply.

superannuation

As an employer, you have an obligation to pay super on behalf of your employees.

Contractors can be deemed employees for the purposes of super.

Generally, if you pay an employee less than $450 before tax in a calendar month, you do not have to pay the super.

The current super rate is 9.5% of their earnings.

Super is usually due quarterly, but is not part of the BAS.

If you don’t pay super on time, you may have to pay the super guarantee charge, which is like interest, and the super payment may not be tax deductible.