Everything you need to know about lodging a business tax return.
There’s a lot to consider when starting a business, but managing your tax obligations is one of the most important responsibilities. If you’ve started a business in the last financial year, the thought of filing your first business tax return may be quite intimidating.
The process can also be a little confusing the first time around, so let’s take a closer look at how to lodge a business tax return correctly.
Choosing a tax agent
How to lodge a business tax return
The allowable methods for lodging a business tax return in Australia vary depending on the type of business you run:
Sole traders
Sole traders report their business income on their individual tax return, which can be lodged as follows:
- Online through the myTax portal
- With a registered tax agent
- As a hard copy
Partnerships
If you operate your business as a partnership, you’ll need to lodge a partnership tax return in one of the following ways:
- Using standard business reporting (SBR) enabled software
- With a registered tax agent
- As a hard copy
Trusts
If your business is operated as a trust, the trustee must lodge a trust tax return in one of three ways:
- Using SBR enabled software
- With a registered tax agent
- As a hard copy
Companies
If your business operates as a company, you must lodge a company tax return in one of the following ways:
- Using SBR enabled software
- With a registered tax agent
- As a hard copy
When is my business tax return due?
The due date for business tax returns once again varies depending on your business structure:
Sole traders
If you lodge through myTax, your return is due by 31 October each year. If you lodge through a registered tax agent, the deadline for lodgement could be as late as May the following year. Your agent will be able to tell you the date by which your return must be completed, but you must be registered with an agent by 31 October.
Partnerships
If you choose to lodge the partnership tax return yourself, it must be lodged by 31 October. If you lodge through a registered tax agent, they’ll tell you when you can lodge.
Trusts
If you lodge the trust tax return yourself, it must be lodged by 31 October. If you lodge through a registered tax agent, they’ll tell you when you can lodge.
Companies
The due date for company tax returns you lodge yourself varies. It is generally 28 February, but you can find the deadline that applies to you on the ATO website. However, if you still have returns outstanding from previous years, the due date reverts to 31 October.
If you decide to lodge through a registered tax agent, your agent will tell you when to lodge.
Is my business tax return separate from my personal tax return?
Yes, unless you are a sole trader. Partnerships, trusts and companies all need to file separate partnership, trust and company tax returns, but sole traders only need to file one return to cover both their personal and business income.
If you’re a sole trader, all the business income you earn must be included with any other income and reported on your individual tax return. You are then solely responsible for any tax your business is required to pay.
What information do I need to provide in my business tax return?
The information and documentation you need to provide in your business tax return varies depending on your business structure:
Sole traders
If you’re a sole trader, the business income you earn is treated as your individual income. Once you have claimed a deduction for all allowable expenses, you must include all business income, along with any other income you have earned, on your individual tax return.
You will be required to lodge the following:
- A tax return for individuals, including the supplementary section.
- The business and professional items schedule for individuals.
You don’t need to work out the amount of tax you are liable to pay as the ATO will do this for you once you have lodged your return. Any PAYG instalments you have paid during the income year will be automatically credited to you.
Partnerships
When you operate a business partnership, you will need to lodge a partnership tax return. This reports the partnership's net income, which is its assessable income minus any allowable expenses and deductions.
However, as an individual partner, you will also need to file an individual tax return and report the following:
- Your share of any partnership net income or loss. For example, if you hold a 30% partnership share, your share of the income or loss is 30%.
- Any other assessable income you have earned, such as salary and wages, dividends and rental income.
The partnership itself doesn't actually pay income tax on the income it earns. Instead, each partner must pay tax on their share of the net partnership income.
The partnership tax return needs to be lodged by the Australian resident partner with the highest individual interest in the partnership net income or loss. When there are partners with equal interests, any of those partners can lodge the return.
Trusts
If your business operates as a trust structure, you provide information as follows:
- The trustee lodges a trust tax return. You report the trust’s net income or loss, which is its income minus any expenses and deductions.
- Each beneficiary of the trust lodges an individual tax return. You report any income you earn from the trust as a beneficiary, as well as any other assessable income, such as salary and wages, dividends and rental income.
Companies
Any business operated as a company has to lodge a company tax return detailing the following’:
- Taxable income
- Tax offsets and credits
- PAYG instalments
- The amount of tax the company is liable to pay or the amount of refund it is owed
The company’s income is separate from your personal income. This means that if you’re a director of a company, you will still need to lodge an individual tax return to report your personal income.
What are the business tax rates?
Sole traders
Sole traders pay the same amount of tax as individual Australian taxpayers, and as such do not have to pay tax on the first $18,200 they earn; this is known as the tax-free threshold. The individual tax rates for the 2016–17 and 2017–18 financial years are shown in the table below:
| Taxable income | Tax payable on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $37,000 | 19c for each $1 over $18,200 |
| $37,001 – $87,000 | $3,572 plus 32.5c for each $1 over $37,000 |
| $87,001 – $180,000 | $19,822 plus 37c for each $1 over $87,000 |
| $180,001 and over | $54,232 plus 45c for each $1 over $180,000 |
Partnerships
A partnership does not pay tax on the profit it earns. Instead, each partner must pay tax on their share of the partnership profit at the individual tax rate. Check the table above for details of the current individual tax rates.
Trusts
Trust beneficiaries pay tax on their share of the trust’s income at the individual tax rate that applies to them. If there are any beneficiaries who are non-Australian residents or minors, the trustee pays tax on their behalf based on their share of the trust’s income.
Companies
There is no tax-free threshold for companies, so every dollar the company earns is taxed. The company tax rate for the 2016–17 income year is 30%, while small business entities are taxed at 27.5%.
What can my business claim as tax expenses/deductions?
The list of tax deductions you can claim varies widely depending on the type of business you run. You are able to claim most business expenses as tax deductions to reduce your taxable income, but you cannot claim expenses that are of a private, domestic or capital nature. Allowable deductions for businesses generally include the following:
- Advertising costs
- Bank fees and charges on business banking products
- Interest on business loans
- Business travel expenses
- Hiring or leasing plant and equipment
- Renting or leasing business premises
- Decline in value of depreciating business assets (depreciation)
- Electricity costs
- Phone and Internet expenses
- Website expenses
- Wages paid to employees
- Super contributions for your employees
- Motor vehicle expenses
- Home office costs, such as computer equipment and stationery
- The cost of any fringe benefits you provided, and fringe benefits tax (FBT) you incurred
- Business repairs
- Trading stock
- Transport and freight costs
- Fees charged by your registered tax agent
This is far from a comprehensive list of the expenses you may be eligible to claim as a tax deduction, so speak to your accountant for advice tailored to your business.
What are the next steps towards completing my tax return?
The first step towards completing your business tax return is retrieving any relevant records.
To complete your tax return, you will likely need records pertaining to the following:
- Copies of any payments received
- Invoices for any business expenses
- A list of debtors
- A list of creditors
- Bank records
- Employee and contractor details
- Any capital gains events (e.g. buying or selling business assets)
Depending on your method of record keeping and whether your business makes use of digital accounting software, you may already have these records freely available.
Then it's a case of deciding whether to lodge your return yourself, or seek the assistance of a tax agent.
To choose a tax agent, go to our table above and click on the 'More' button to find out more about a provider, or click the green 'Go to Site'button to be securely redirected to a providers site.
