Australian Tax Accounting Software for Businesses
The tax legislation and regulations affecting businesses are different to those that individuals need to comply with. The reporting requirements also differ according to business size. So, while there are online tools that individual taxpayers can use to complete their annual tax return, there aren’t any similar solutions for businesses.
Instead, small- and medium-sized businesses can use the Tencia business and accounting software package. As a full-service accounting product, Tencia includes functionality that make it easier to record and store data needed for various tax reports of both the business and employees. These include GST, business activity statements (BAS), employee deductions, and pay as you go (PAYG) instalments. And being locally developed and supported, you can trust that Tencia will enable your business to fully comply with all Australian tax legislature and regulations, both federal and state.
Business Tax Requirements
For tax, a small business in Australia is defined as one with an annual turnover of less than $10 million. If your business qualifies as a small business, these are the tax records, reports, and payments you are responsible for in Australia.
Tax File Number & Australian Business Number
Regardless of size, you need both a Tax File Number (TFN) and an Australian Business Number (ABN) for your business. If you’re a sole trader, you can use your personal TFN, but will need a separate TFN if you’re registered as a company, partnership, or trust.
Anyone operating a business in Australia should register for an ABN as it:
- helps you avoid pay as you go (PAYG) tax on invoices you issue, and
- allows you to claim goods and services tax (GST) credits.
You can still register for an ABN as a sole trader, as long as you have not been engaged by someone else to carry out work as an employee.
Pay As You Go (PAYG) Withholding
The Australian Taxation Office (ATO) requires businesses to withhold tax from certain payments made to other people or businesses. These include:
- payments made to employees, company directors, and office holders,
- payments made to workers and contractors under a labour-hire agreement or voluntary agreement,
- payments made to businesses where an ABN was not quoted.
Goods and Services Tax (GST)
If your business is registered for GST, you need to collect a tax from your customers. This tax is equal to 10% of the price for most goods and services. Registration for GST is optional, unless:
- your annual GST turnover is $75,000 or more,
- you provide taxi, limousine, or ride-sharing (Uber, GoCatch, etc.) services, regardless of GST turnover, or
- you want to claim fuel tax credits, regardless of GST turnover.
Fringe Benefits Tax (FBT)
If you provide any of your employees with fringe benefits in addition to a salary or wage, you need to register for, record, and pay FBT. The FBT year runs from 1 April to 31 March, and employers have to self-assess FBT liability and lodge a return separate from income tax.
However, you can claim income tax deductions and GST credits on the cost of providing certain fringe benefits.
Payroll tax is a state and territory tax that businesses are liable for when their total wage bill exceeds a threshold amount. The threshold amount varies between states and territories.
Tax Reporting Requirements
Single Touch Payroll (STP) replaced traditional payroll reporting in 2019, though small businesses with fewer than 20 employees still have time to transition to this method. Many business accounting software packages such as Tencia are already STP-enabled, and as soon as you run your payroll it will automatically collate and report information such as:
- all salaries and wages paid in each payroll,
- any PAYG withholding related to salaries and wages, and
- any super liability information related to this payroll.
Your STP data is finalised at the end of each financial year through a declaration you make stating that all payroll reporting for the year has been completed.
Learn more about Tencia’s implementation of Single Touch Payroll (STP) with an obligation free demonstration of the system.
Business Activity Statement
You need to lodge a Business Activity Statement (BAS) monthly, quarterly, or annually, depending on the ATO requirements for your business. This allows you to report and pay:
- Goods and services tax (GST) collected since your last BAS was lodged. You should subtract any GST credits you can claim.
- Pay as you go (PAYG) instalments.
- PAYG withholding tax.
- Other taxes you are liable for, such as FBT.
Tencia business accounting software can’t lodge your BAS for you, but it makes completing it easier, and more accurate. This is thanks to the system keeping a record of all sales, expenses, fees, salaries and wages, and other business costs. The ability to integrate Tencia with your bank accounts helps streamline reconciliation of your bank statements, though you would still need to keep all tax invoices and GST records received by you for five years.
Financial Year Reporting & Business Income Tax
The Australian financial year runs from 1 July to 30 June. Just as individuals need to lodge an income tax return for this period, so too do businesses. Any income tax your business is liable for is calculated on your assessable income for the financial year, less any deductions your business qualifies for. If you are registered as a sole trader, you can declare your business income with your personal income tax return.
Many expenses incurred in running your business can be claimed as deductions on your business income tax, however, there are certain conditions to be aware of.
- The expense must relate directly to your business and to its income.
- If the expense was partially for business and partially for personal use, you can only claim on the portion related to the business.
- You need to have detailed records to support the claim, and these need to be kept for five years.
All records relating to your business and its tax obligations need to be kept for five years, even if you sell the business. These records relate to income and expenses, along with other items that affect your GST, PAYG, FBT, Payroll tax, and Business Activity Statements. Business related records include:
- All records of income and sales.
- All records of purchases and expenses.
- List of debtors and creditors, stocktake sheets, and depreciation schedules.
- All bank records, including bank statements and loan records.
- Details of goods and services (GST), including tax invoices from suppliers.
Employee related records include:
- Tax file number (TFN) and withholding declarations for each employee.
- Detailed records of wages, allowances, and other employee payments.
- Superannuation records.
- Details of any fringe benefits for FBT purposes.
Arrow’s Tencia accounting ERP software does not complete or lodge any tax forms or reports for you, but through its robust accounting, payroll, and inventory modules it automates most record-keeping requirements for tax, and makes it easier to complete and lodge your BAS and income tax return, in addition to fully supporting Single Touch Payroll (STP).
Reserve your spot for our next online demonstration to learn more about Tencia’s business tax features and to get answers to questions you have about our product range.