Choose the Right Business Structure

 

The core structures (Sole Trader, Partnership, Company, Trust) remain the same.

StructureTaxationKey Point

Sole TraderIndividual Income Tax RatesSimple structure; no separate legal entity.

PartnershipIndividual Income Tax Rates on share of net incomePartners are jointly and severally liable.

CompanyCorporate Tax RateSeparate legal entity.

TrustIncome distributed to beneficiariesStructurally complex; major tax planning tool.

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Corporate Tax Rate for Companies:

• 25% for a 'Base Rate Entity' (Aggregated turnover less than $50 million and 80% or less passive income).

• 30% for all other companies.

 

2. Register for an ABN and TFN

 

Registration for an Australian Business Number (ABN) and a Tax File Number (TFN) is still mandatory. The ABN remains crucial for invoicing and avoiding PAYG withholding tax from other businesses.

 

3. Understand Your GST Obligations

 

You must register for the Goods and Services Tax (GST) if:

• Your business has a GST turnover of $75,000 or more ($150,000 for non-profit organisations).

• You provide taxi or limousine travel (including ride-sourcing), regardless of turnover.

• Once registered, you charge 10% GST on sales and must lodge regular Business Activity Statements (BAS).

 

4. Claim All Eligible Deductions

 

You can claim deductions for most expenses directly related to earning your business's assessable income.

Key Deduction Changes & Updates:

• Instant Asset Write-Off (2024-2025): Businesses with aggregated turnover less than $10 million can immediately deduct the full cost of eligible depreciating assets costing less than $20,000 per asset.

  • Note: Under current legislation, this threshold is scheduled to drop to $1,000 per asset from 1 July 2025.

• Working from Home: The fixed rate method for claiming additional running expenses is 70 cents per hour from 1 July 2024.

 

5. Understand PAYG and Superannuation Obligations

 

If you employ staff, you have two key obligations:

• PAYG Withholding: Deduct income tax from employees' wages and report/pay this to the ATO.

• Superannuation (Super Guarantee - SG): Pay mandatory super contributions for eligible employees.

  • 2024-2025 Rate: The SG rate is 11.5% of an employee's ordinary time earnings.

  • Future Change (from 1 July 2025): The SG rate is scheduled to increase to 12% of an employee's ordinary time earnings.

 

6. Keep Accurate Records

 

The ATO requires you to keep records for at least five years. Accounting software is highly recommended.

 

7. Consider Tax Planning Strategies and Key Dates

 

Proactive planning is essential, especially around the major legislative changes commencing on 1 July 2025.

Strategy/ChangeDetails & ImpactStart Date

Super Guarantee Rate IncreaseThe mandatory employer contribution rate increases to 12%. Requires payroll system update.1 July 2025

Deductibility of ATO InterestInterest charged by the ATO (General Interest Charge/Shortfall Interest Charge) on overdue tax debts will no longer be tax deductible. This makes tax debt more costly.1 July 2025

Instant Asset Write-Off ChangeThe threshold is currently $20,000 for 2024-2025. Plan any large asset purchases before the end of the financial year (30 June 2025) to utilise the higher write-off limit, as it is scheduled to revert to $1,000 per asset for the 2025-2026 year.1 July 2025

Business Tax Return Amendment PeriodBusinesses with aggregated turnover of less than $50 million have an extended period of up to 4 years (instead of 2) to request amendments to their tax assessment.2024-2025 and later income years

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