Taxation requirements for small business can seem daunting. Many abbreviations and shorthand words can seem unfamiliar. However, it does not need to be that way. Accountants use these abbreviations everyday because we need to save time and get things done quickly. However, the ideas and concepts are rather simple when you look closer. After reading through this page, you will have a clear understanding of what these terms mean… in plain English.
Let’s begin with capital gains tax, or CGT. This is one of the main taxation requirements. You probably intuitively understand what it means to gain and lose. This tax is applied when you gain money from buying and selling. Most commonly, it is for real estate or stock.
When you buy a stock, for example, you probably want to sell it at a price higher than what you paid. When you do, you are taxed on the difference between the buying and selling price. However much you “gain” on the capital is what you pay tax on. For a better understanding of taxation requirements of CGT, visit our page discussing how to calculate capital gains tax.
Fringe benefit tax, or FBT, is one of the taxation requirements based on the extras you get from your job or business. A company car is the most common fringe benefit. The Australian Tax Office insists you pay tax on additional benefits you receive during the course of your work.
The idea of FBT is quite simple. However, it is the rules that become complicated. There are exceptions for determining what qualifies as a fringe benefit. If a vehicle carries more than eight passengers or weighs more than one tone, then it may not be subject to the tax. There are more fringe benefits than just company vehicles, so you’ll need to address the possibilities with your accountant.
Finally, there is the Goods & Services Tax, or GST. In concept, the GST is very simple. It taxes all goods and services in Australia. This is definitely one of the taxation requirements for businesses. It’s a value-added tax of 10%. If you are in business, you’ll end up paying GST.
The difference, of course, is in the rules for applying GST. There are of course exceptions to the rule that can save you money. Furthermore, courts are still deciding the application of GST, which came into effect in 1999.
All of these types of taxes become more complex when they are included as part of Superannuation. Often, employer salary sacrifice arrangements can reduce the burden of these taxes. That’s because including them in your superannuation package allows you to defer taxes until you withdraw the money. The benefit is greater, but you’ll need to understand the implications. That is where our superannuation advisory service may help you.
If you have further questions about CGT or other terms, Tim Nash & Associates can help you prepare for these taxation requirements and reduce your tax burden. Give us a call today to find out more.