The facts to know when filing an Australian income tax return

The rundown on sole trader tax returns

1. You must file a tax return if you derived any form of business income, self-employment income, or contracting income. If you operate your business as a sole trader you must lodge a tax return even if your income is below the tax-free threshold.
   
   
2. In your return, you should report your business income less the business deductions you can claim, as well as other income such as salary and wages (from a payment summary or income statement), dividends and rental income, less any deductions against this income.
   
   
3. The financial year (tax year) in Australia runs from 1 July to 30 June. 
   
   
4. The tax rate for sole trader tax returns is based on personal income tax rates. The ATO's website has more information about individual income tax rates.
   
   
5. Late filing of tax returns may result in penalties and interest charges.
   
   
6. Income tax returns are used to calculate the amount of income tax owed for the tax year.  Even if you're filing frequent Goods and Services Tax returns, you still must file an annual income tax return, as it is a separate tax.
   
   
7. Taxable income includes salary and wages, interest, dividends, business income, and rental income.  
   
   
8. You can claim a tax credit for tax deducted before it was paid to you - for example, PAYG deductions made by your employer, Resident Withholding Tax (RWT), or Franking Credits showing on dividend and interest certificates.
   
   
9. You can file your own tax return or work with an accountant.
   
   
10. Tax returns must be filed by the 31st of October for the previous tax year if you decide to file yourself, or by the 15th of May of the following year if you're working with a registered tax agent. Note that you need to register with the tax agent before the 31st of October.
    
    
11. Tax returns can be amended if you find errors or omissions after they've been filed.
    
    
12. Business expenses can be claimed in a tax return against business income as long as it helps generate taxable income. You’re not eligible to claim expenses that have ‘personal elements’. 

The facts on corporate tax returns

1. If your company is trading, you must file a corporate tax return, this is regardless of whether the business is reporting a profit or loss and above or below the tax-free threshold.
   
   
2. Your tax lodgement and payment dates will vary, depending on your turnover and your company structure. You can refer to the ATO for the most up-to-date lodgement and payment dates. Generally, the lodgment and payment date for small companies is the 28th of February. If you have any prior year returns outstanding the due date will be the 31st of October.
   
   
3. It’s important to be prepared with the right information to prepare a tax return. The additional information your accountant could find important includes:
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4. Late filing of tax returns will result in penalties and late payment of your tax liability will result in interest charges.
   
   
5. Corporate tax returns are used to calculate the amount of corporation tax owed for the tax year.  If your company generates a loss during the period the tax return calculates the taxable loss that can be carried forward and offset against future taxable profits, therefore reducing your tax liability in future periods.
   
   
6. The company reports its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is liable to pay on that income or the amount that is refundable.
   
   
7. Tax credits are sometimes available. For example, if you hit certain criteria during R&D, such as innovation or making advancements in science and technology, then tax credits can be claimed. There are also tax concessions available for small businesses with an aggregated turnover of less than $10m, simplified depreciation rules (including the immediate write-off of depreciating assets), and Capital gains tax (CGT) concessions. Your accountant at Beany will be able to ensure that you don’t miss out on any of these concessions.
   
   
8. You can file your own tax return or work with an accountant.
   
   
9. There is no tax-free threshold for a company.
   
   
10. The law sets time limits for amending your tax assessment, and are generally:
    - two years for small businesses
    - two years for medium businesses for income years starting on or after 1 July 2021
    - four years for other taxpayers
    This time limit starts from the date of your notice of assessment.
    
    
11. Company tax rates can be found on the ATO website.
    
    
12. Business expenses can be claimed in a tax return against business income as long as they are incurred wholly and exclusively for the purposes of the trade. The ATO discusses what business expenses you can claim.

The ATO plays a role in every Australian income tax return

1. The ATO can audit tax returns to ensure compliance with tax laws.
   
   
2. The ATO can impose fines and penalties for non-compliance with tax laws.
   
   
3. The ATO provides tax tables and calculators to help calculate the amount of tax owed.
   
   
4. Employers are required to deduct Pay As You Go (PAYG) tax from employees' salaries and wages and remit it to the ATO.
   
   
5. Businesses must keep records of their income and expenses (e.g., bank statements, receipts, invoices) for at least 5 years as per ATO’s requirements from the date of the lodging of the tax return.
   
   
6. The ATO can negotiate payment plans for taxpayers unable to pay their tax debt in full.
   
   
7. The ATO can issue tax assessments if it finds errors or omissions in tax returns.
   
   
8. Tax refunds can be claimed by filing a tax return or by contacting the ATO.
   
   
9. The ATO offers a range of online tools and resources, including tax calculators, tax guides, and tax information bulletins.
   
   
10. The ATO can offset tax refunds against outstanding tax debts.
    
    
11. Tax returns can be filed using a paper form, online using the myTax portal using your myGov login or with a registered tax agent.
          
    
12. The ATO refunds overpaid tax, including PAYG and GST. 
    
    
13. Employers must keep records of employees' salaries and wages, PAYG tax deducted, and superannuation contributions for 7 years.
    
    
14. Professional help from a registered tax agent or accountant can minimise the risk of errors and penalties and help ensure compliance with tax laws.

How can Beany help with business tax returns?