Operating your business as an incorporated company will transform your enterprise into a separate legal entity. This more complex business structure is usually more costly to set up and administer, and will also come under the regulations of the Australian Securities and Investments Commission (ASIC).
A company will have far greater access to capital, shareholders are not liable for the debts of the business beyond the amount of capital they contributed, there will be greater asset protection because creditors can’t go after the shareholders’ personal assets, only the company’s own assets, and it will pay its own tax on its own profits. But tax reporting requirements are more onerous, and minority shareholders have little say in the running of the business unless they are in senior management.
For a company:
• it will need its own bank account, and its own tax file number
• it needs to lodge an annual income tax return, as money earned by the business belongs to the company
• the tax return will need to show the company’s income, deductions and tax it is liable for
• PAYG instalments will need to be paid, which are credited against the end-of-year income tax
• it will pay tax on its assessable income (profits) at the company tax rate of 30%, and there is no tax-free threshold
• GST registration is required if annual turnover is more than $75,000
• Compulsory superannuation payments have to be made where required by law in respect of the company’s employees (including yourself, if you are a director of the company)
• if you receive wages or director’s fees, this needs to be shown on your individual income tax return.
If you are a shareholder in the company then you are entitled to receive dividends on which you will pay tax. It is important to note however, that if the company makes loans or payments to you, or if you take company assets for yourself, the law may treat these transactions as unfranked dividends, and they’ll be taxable to you as such, unless they are formally converted into interest-bearing loans.
The GST system is a complex and confusing one. For this reason AWARD ensures its staff are continuously up to date on the changes, and able to offer you accurate advice.
Every transaction now brings with it a GST issue. We have experience with these issues and are able to offer expert advice on the implications of GST for your business.
The GST related services we offer include, but are not limited to:
- Advice on registering for GST
- Filing and adjusting GST returns
- ATO audit assistance
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