Having the right business structure can save you time and money.

The four most commonly used business structures in Australia are: 

• Sole traders

• Partnerships

• Companies

• Trusts

There are real advantages in choosing a structure best suited to the way you want to operate your business. It’s important you understand these advantages and responsibilities as they may affect

• the way tax applies to your business

• protection of your assets

• your operating costs 

• how other businesses deal with you.

You should use this information as a guide only. We recommend you talk to an accountant,tax professional, solicitor or other adviser before deciding which business structure to use.

1. Sole traders

If you operate your business as a sole trader, although you may decide to have employees, you trade, control and manage all aspects of your business.

Advantages: 

• There are very few legal and tax formalities involved setting up the business.
• The structure is inexpensive to set up.
• You have full control of the business.
• You receive the full benefit of profits made by the business.
• You keep all the after-tax gains if the business is sold.

Things to consider:

• Your access to finances is usually limited to your own resources.
• If you have no employees, you usually have to do all the work.
• You are legally responsible for all aspects of the business.
• Debts and losses cannot be shared.
• You can lose private assets such as your home, contents and vehicles if the business goes into debt.

Reporting and paying income tax:

As a sole trader, you need to report the business income you earn (after expenses) on your personal income tax return, along with any other income you earn.
You pay the same tax as any other individual and you’re also entitled to the tax-free threshold (the first $6,000 you earn in an income year) if you’re an Australian resident.

Paying super:

You’re responsible for your own super arrangements and may be able to claim a deduction for personal super contributions you make. You must also make super contributions for any eligible workers you employ.

2. Partnerships

If you operate your business as a partnership, you’re carrying on your business with one or more other people as partners and receiving your income jointly.

Advantages:

• Partnerships are inexpensive to set up.
• Greater access to finances from the resources of all partners.
• There are more people to share the work load.
• There are more people to share losses and legal responsibilities.

Things to consider:

• You must share the profits with the other partners.
• You and your partners are responsible for the debts of the partnership, even if you do not directly incur or cause the debt.
• You can lose private assets such as your home, contents and vehicles to settle debts of the partnership.

Reporting and paying income tax:

Although your business does not pay tax, you need to lodge an annual partnership income tax return on behalf of the business to show the total income earned and deductions claimed by the business.
The tax return also shows each partner’s share of net partnership income.As a partner, you need to pay tax on your share of the partnership income (less expenses) you earn.
under a partnership, each partner is personally liable for the tax debts of the partnership.

Paying super:

As a member of the partnership, you’re responsible for your own super arrangements as you’re not an employee of the business. You may be able to claim a deduction for any personal super contributions you make, and the partnership must make super contributions for any eligible workers they employ.

3. Companies

If you operate your business as an incorporated company, the business is a distinct legal entity that is regulated by the Australian Securities and investment Commission.
A company is a more complex business structure. usually, the set-up and administrative costs for a company are higher than for other business structures.

Advantages:

• A company has far greater access to capital for the running of the business.
• A company pays tax on its own profits.
• Shareholders are not liable for the debts of the business.
• Increased asset protection.

Things to consider:

• A company is more expensive to establish.
• The tax reporting requirements for companies are far greater than for sole traders and partnerships.
• Shareholders have little say in the running of the business.

Reporting and paying income tax:

Your company must lodge an annual company tax return to report its income and deductions, and the income tax it is liable to pay. All companies pay their own income tax.
Your company pays tax on its net profit at a flat rate of 30%, which may be an advantage for businesses with high profit levels.

If you receive wages or director’s fees from your company, you need to:

• Include them in your individual tax return
• Pay tax on them at the individuals tax rates.

Paying super:

Your company must make super contributions for any eligible workers it employs, including you as a company director.

4. Trusts

If you operate your business as a trust, you’re:

• A trustee.
• Responsible for holding property or income for the benefit of others (the beneficiaries).

The most common variety of trust is the discretionary trust. If you’re the trustee of a discretionary trust, you have the power to decide how the profit will be distributed among the beneficiaries. 

Advantages:

• A trust has a limited liability if the trust is a company.
• A trust has perpetual existence and does not cease with the death of a beneficiary.
• Increased asset protection.

Things to consider:

• Like a company, a trust is more expensive and potentially complicated to establish.
• It may be more expensive to complete the required tax and administrative paperwork each year.
• Profits distributed to children under 18 may be taxed at higher rates.

Reporting and paying income tax:

Your discretionary trust does not have to pay tax. Instead, the trust beneficiaries pay tax on their share of the trust’s net income.
As a trustee, you can use your discretion each year to decide which beneficiaries will receive income. Trusts can pay very high rates of tax on any profits that are not distributed.

Paying super:

Your trust must make super contributions for any eligible workers it employs. This includes you if you’re employed by the trust.

By segregating assets, the fund is in effect being operated as two distinct subfunds.

This means two separate bank accounts and could even mean two separate holdings of shares in the one company.

Many of the attempts to segregate between pensioners and non pensioners in order to save the cost of an actuarial certificate end up costing the fund more in fees. Not all accounting practices use superannuation accounting software, our audit team sees many funds which have had their accounts prepared using a general ledger package. For these funds, additional work has to be done outside of the accounting package, usually via a spreadsheet, in order to record income, changes in market values and asset values.

But even if superannuation accounting software is used, the client’s accountant is reliant on his/her client to act throughout as though the client has two superannuation funds. Getting the income in respect of pension and accumulation accounts into the right bank account is usually fairly easy. All that is required is for the trustee to give the correct banking details to the registrar for shares, the estate agent for property and the bank for term deposits.

Problems with income are more likely to arise when either the fund rents a property to the members’ business or it is acquiring a property using a limited course borrowing arrangement.

Paying the required pension from the pension bank account can sometimes be a difficulty. This is more likely to occur for funds which tend to pay the pensions annually. The trustees may not have built up a sufficient balance in the pension bank account. The client sees a simple solution. They have just paid their annual contributions to the fund. The money is sitting in a bank account, why not just pay the pension from this account? Because if the pension is paid from the accumulation fund bank account, the assets of the fund are no longer segregated.

Fund expenses including tax is an area in which many funds trying to operate segregated accounts fail. The accountant and the auditor submit their accounts and are paid. Segregation requires two payments, one from the pension bank account and one from the accumulation bank account. And each should pay its fail share.

Likewise any investment expenses, such as council rates on property should be paid according to whether the property belongs to the accumulation or pension account. If the intention is to have it part owned by the pensioner and accumulation members, expenses and rental income should be allocated between the two on a pro-rata basis.

The pension paying part of the fund will be exempt from tax and be entitled to a refund of its imputation credits. The accumulation members will pay tax on contributions and earnings net of expenses and will also be able to offset imputation credits. The result will be one part of the fund is entitled to a refund and the other part, the accumulation members, will have a liability. To correctly account for tax will mean a transfer for many funds from the accumulation members’ bank account to the pension members’ bank account.

Reading the above you may gain the impression that we don’t believe asset segregation is a good idea. Rather our experience has been to see many funds want to segregate assets but have seen very few do it correctly. And this includes funds which have gone to the trouble to establish two bank accounts.

We would instead suggest the question be asked – why should segregation be considered? It may because the fund has four members, the parents and a child and the child’s spouse / partner. The younger members want an emphasis on capital growth, the older ones want to be more income oriented.

But if the reason is to save the cost of an actuarial certificate, we think many people will find the additional costs of operating a segregated fund to be greater than the savings.

Newsletter written by Martin Murden
Director, Technical Consulting and SMSF Audits

PARTNERS Superannuation Services Pty Ltd

Martin Murden, the Director of Technical Consulting and SMSF Audits for Partners Superannuation Services, has recently shared with us very valuable information pertaining to insurance and SMSFs. We would like to pass this valuable information further for your benefit.

A Partners Group 2012 audit survey showed that approximately one in three non-pension paying SMSFs held insurance in respect of the fund’s members. This represents a small increase over the previous year.

Insurance cover falls into one of four groups:

• Life
• Total and Permanent Disability
• Income Protection
• Trauma

The increasing number of SMSFs borrowing to acquire property has resulted in more funds insuring members especially if one is critical to ongoing contributions to the fund. For a couple, this would be the key person in their business. If he/she died or became disabled, the business would either cease or be severely damaged. The business, if it has not done so already, needs to assess its needs in case of such an event.

When a SMSF decides to insure a member to enable debt to be repaid, there are differences to the normal provision of insurance cover to boost a member’s balance. In the usual situation, the insurance premium is deducted from the member’s account and the insurance proceeds are added to the member’s balance. This does not help with the repayment of debt unless the beneficiary or the disabled member elect to take benefits in the form of a pension.

A lump sum benefit would require the insurance proceeds to be paid out of the fund. Even if the beneficiary wanted to leave the proceeds in the fund to repay the debt and commence a pension or income stream, he/she may not be able to do so under the fund’s trust deed. Many trust deeds we have sighted in recent years require benefits to be paid by way of a lump sum if the deceased/disabled member was not in receipt of a pension at the time of death or disablement.

In addition to having insurance cover to boost a member’s benefits, funds with debt to be repaid could establish a reserve account to specifically hold insurance cover in the event of death or disablement of one or more members. Each year an amount equal to the premium payable would be placed into the reserve and used specifically for this purpose. There is some documentation required to put such a reserve in place.

A side effect of using such a reserve is it could also enable an anti-detriment payment to be paid upon death with substantial tax benefits being obtained.

From an audit perspective

Some of the problems The Partners audit team see with insurance policies are:

The policy is held in the name of the insured only whereas it should be in the names of all of the individual trustees or the name of the corporate trustee and it should be held in their capacity as trustee for the fund. Changes to legislation that took effect from August 2012 allow the ATO to impose penalties upon the trustee when assets are not correctly held (insurance policies are considered as fund assets); and
The policy belongs to another superannuation fund. In these cases the policy belongs to a superannuation fund operated by the company issuing the insurance policy. Any amounts paid by the SMSF are roll-overs to the second fund and not tax deductible premiums. And in the event of death payment can be delayed for a lengthy period. The trustee of the insurance company fund has to decide who should receive the proceeds and in the event of a dispute between family members, the Superannuation Complaints Tribunal may make the final decision.

Two final important points to be made about insurance and SMSFs:

From July 2011, a tax deduction is only available for total and permanent disablement insurance where the definition of disablement is an “any occupation” definition. If it is different i.e. “own occupation” then only a partial deduction may be claimable; and
From July 2013, it has been proposed super funds will no longer be able to have trauma insurance cover. Generally, most funds we see do not hold trauma insurance due to difficulties in getting the proceeds out if the client is under preservation age.

Newsletter written by Martin Murden
Director, Technical Consulting and SMSF Audits
PARTNERS Superannuation Services Pty Ltd

Director, Technical Consulting and SMSF Audits
PARTNERS Superannuation Services Pty Ltd 

Background

Since 2007, self managed superannuation funds (SMSF’s) have been permitted to borrow to acquire assets. Almost all purchases by a SMSF with borrowings relate to property.

Structure

 It is necessary to first establish a security trust (Security Trust) to hold the property whilst the debt remains and second to have a transfer agreement between the SMSF and the Security trust.  This can be seen in the following diagram:

SMSF

It goes without saying that a SMSF is required.

The Partners Group recommends a corporate trustee for SMSF’s for asset protection reasons, administrative efficiency, continuous succession and estate planning flexibility. Whilst it is not a legislative requirement, lenders have different policies with regards to SMSF trustees and may insist on a corporate trustee.

If there is an existing SMSF, the trust deed governing the SMSF may require updating either because of the changes made since the SMSF was established or because the wording in the deed relating to borrowings is insufficient for the lender.

Security Trust

 A Security Trust is a trust, controlled by the members of the SMSF, that has one purpose and that is to hold the property until the debt has been repaid.

The reason a separate trust is required is because legislation prohibits the SMSF from using any of its assets as security for the debt.   A property held by the Security Trust can be used as security.

Again, the Partners Group recommends a corporate trustee for the Security Trust.  The directors would be the members of the SMSF.

Transfer Agreement

This is an agreement between the SMSF and the Security Trust recognising the Security Trust is holding the property in trust for the SMSF and will transfer the ownership of the property to the SMSF once the loan has been fully repaid.   It is important that the transfer of the property to the SMSF occurs at this point to ensure continued compliance with superannuation legislation.

Purchase a commercial or residential property

The only restriction imposed upon the property being acquired is a SMSF cannot acquire a residential property from a member of the SMSF, a relative of a member or an associated party such as a company owned by the member or a trust in which the member is a beneficiary. It is important note a residential property cannot be used by a member of the fund or a member’s relative.

Limited Recourse Borrowing Arrangement (LRBA)

The only security for a SMSF borrowing is the property itself (limited recourse).  No other assets of the SMSF can be used as security.

The loan can be sourced from a third party lender or a member of the SMSF or an associate, such as a member’s family trust (self financing loan).

A bank will typically require a deposit of up to 30% (residential property) and 35% (commercial property).   The amount of deposit required can be reduced if a self-funding loan is used.

Lenders will require personal guarantees, however these cannot be given in the capacity as a member of the SMSF as the recourse of the lender to the SMSF is limited to the asset in question. If the SMSF defaults on the loan, the personal assets of the guarantors may be called upon to repay the debt.

A self financing loan still needs to be properly documented and it must be on commercial terms.

A loan can be re-financed but only be for the current amount owing on the existing loan plus associated costs.

Financial Advice

Financial advice covers the viability of the strategy including cash flows, tax, contributions and personal risk protection.  In addition the advisor would sign off on the strategy for lending approval.

It is not requirement of law for a financial planner to be involved.   If the loan is to come from a bank however the bank will require evidence that the SMSF has received advice from a financial planner.

The Partners Group recommends that it is prudent to receive financial advice in all situations.

The benefits of borrowing to acquire property

There are two key benefits:

1. a property can be acquired even though the SMSF does not have sufficient cash to purchase the property
2. the SMSF can use gearing to obtain capital growth on the total property value whilst only partially paying for the property.

Common problems sighted

These are some of the issues that may arise:

(i)  applying for the wrong type of loan. Whilst the ability for a SMSF to borrow to buy property has been available for five years, not all mortgage brokers or banks have experience in this area. If the wrong type of loan is used, it may be costly to rectify problems.   And if the property is not held via the Security Trust, it may not be possible to replace the loan with a LRBA;

(ii)  acquiring the property with inadequate funds. Consideration needs to be given to how the loan with be serviced if the property becomes untenanted for a period of time or the tenant fails to pay rent when due;

(iii) forgetting the insurance cover on the lives of the SMSF members. This typically occurs when money is to be transferred from an industry/retail fund into a new SMSF. Replacement insurance cover should be arranged prior to the transfer of money as insurance cover ceases at the time of transfer;

(iv) signing a contract of sale with an early settlement date.  Typically, lenders require a minimum of 60 days from receipt of a loan application to settle the loan;

(v)  not seeking advice before entering into the sale contract, whether that is financial or legal.  For example, LRBA’s may not be suitable where there are plans to improve or develop the property;

(vi) not documenting the transaction properly;

(vii) high degree of variance of experience and understanding between lenders. Each lender and sometimes branches of the same lender has different ‘requirements’ with regards to the LRBA documents and structures.  Where the lender’s requirements are not made clear at the beginning of the transaction, or at the earliest stage possible, there is the real potential for delays to satisfaction of finance conditions and settlement;

(viii) not having the right purchasing entity named in the sale contract.  This is not a huge issue in Victoria but in other states new contracts may have to be entered into or there could be stamp duty implications with regards to nominating a new purchaser;

(ix) not taking an integrated approach with regards to advice from finance brokers, financial planners, lawyers, conveyancers, superannuation advisors.  Often additional time and expense are incurred where advisors are engaged from several different organisations.

Offering from Partners Group

The Partners Group has extensive high level experience in the LRBA space, with the Partners Group having successfully completed hundreds of LRBA’s for clients purchasing both residential and commercial property through their SMSF’s.

Partners has worked with a wide variety of lenders, and has assisted clients in Victoria, New South Wales, Queensland, South Australia, West Australia and Tasmania.

Earlier this year, a prominent Sydney based art dealer was arrested and charged with numerous offences in relation to artworks. The art dealer specialised in the sale and lease of artworks in the self managed superannuation fund market. Generally, these artworks were hung in various galleries and other premises for safekeeping. The self managed superannuation funds did not have physical possession of the artworks involved and it appears that the art dealer was able to sell many of the artworks to more than one buyer.

The Cooper Review of Australia’s superannuation system recommended that self managed superannuation funds be prohibited from investing in collectables and personal use assets. However, the Federal Government bowed to pressure from the art industry and only tightened the rules that apply to such investments rather than banning them.

The State Taxation Acts Further Amendment Act 2011 received Royal Assent on 29 November 2011 and introduced changes to the Duties Act 2000 to reduce the period for the payment of duty. The time period for paying duty and lodging documents will be reduced from 3 months to 30 days.

The change comes into effect for dutiable transactions (i.e. generally this is the date of settlement) and relevant acquisitions (i.e. land rich duty), which occur on or after 1 April 2012.

Transitional Period:

In recognition of the change in the period for payment of duty from 3 months to 30 days, the State Revenue Office is instituting a transitional period from 1 April 2012 to 30 June 2012 which will include the following elements:

1. No penalty tax will be imposed for late payments of duty during the transitional period,
2. No premium interest will be imposed for late payments of duty during the transitional period, and
3. Market interest will be imposed on late payments of duty unless the customer (or his or her representative) is able to demonstrate that there were circumstances beyond his or her control that led to the late payment. These situations will be considered on a case-by-case basis.

Announcement from Shelcom:

Stamp duty must now be payed before the stamping of trust deeds can occur.

Announcement from the ATO:

In order to improve the integrity of SMSF trustee and member details, over the coming weeks, the ATO will be reviewing all self-managed super fund (SMSF) trustee and member details and amending registration records when required.

As a result of this work, existing SMSF trustees may receive a trustee education letter and information pack for the first time from the ATO.

This pack includes publications relating to the role and responsibilities of an SMSF trustee. This letter and information pack will be for educational purposes only to support trustees in their roles.

Do you have questions?

Telephone: 1300 722 796
E-Mail: Companies@shelcom.com.au

How can the SMSF legally purchase business premises from the business owners?

Unlike residential properties, ‘business real property’ can be purchased from related parties by a SMSF without breaching section 66 of the SIS Act. The property is required to be business real property that is used exclusively in a business (e.g. it can’t be a retail shop with a residential premise above it). In addition, the acquisition needs to be at market value (i.e. independently valued).

The sole purpose of the transaction must be to provide a retirement benefit for the members (i.e. consistent with the investment strategy of the SMSF). You should consult with your financial advisor if appropriate to ensure it is a good fit with your portfolio.

Can the property be transferred for nil consideration?

Business premises can also be transferred into an SMSF without cash (in-specie). The transfer is considered a contribution for the SMSF members and subject to the contribution cap limits. Non-Concessional Personal Contributions of $150k per annum is the contributions limit each year (subject to the age and work status of the member). However, for those members under the age of 65 non-concessional contributions of $450k per member can be utilized using the ‘bring-forward’ rule. Concessional employer or concessional personal contributions can be made of $50k for those over 50 years of age, or $25k for those under 50.

Most SMSF’s have commonly two members (with a maximum of four members), and therefore most small businesses commercial properties being under 1 million dollars in value can typically be transferred in without breaching contribution limits and incurring excess contributions tax. Care needs to be taken when making contributions in the following two years if you trigger the ‘bring forward’ provisions. A combination of cash/in-specie payments could also be done to transfer the property in.

What about gearing if the SMSF does not have sufficient funds to purchase outright?

Yes, this is possible but it is vital that the transaction is completed in the correct manner and properly documented.

Business real property can be purchased by the SMSF from a related party providing any existing mortgage has first been discharged. The existing gearing must be extinguished before being transferred into the SMSF, and a new gearing arrangement can be established through a limited recourse borrowing arrangement. It is critical that an independent valuation is used to determine the purchase price.

Unlike an ordinary borrowing arrangement, a limited recourse loan is established through a bare trust to gear the property legally in an SMSF. It is generally recommended that the level of borrowing does not exceed 60% of the value of the property. The reason for this is that generally the investment will be cash flow positive and not require additional funding from outside the SMSF. Defaulting on repayments in these arrangements may trigger a personal guarantee payment demanded by your bank, and that payment would be considered a contribution by the member, potentially giving rise to excess contribution tax if the contribution limits are exceeded.

The limited recourse borrowing arrangement can be an ideal opportunity to give the SMSF members the ability to purchase a property they would not otherwise have the resources to afford. It is critical to seek expert tax and legal guidance to benefit from these structures.

Commercial Lease Arrangements

Once the property is within the SMSF, a legally enforceable lease arrangement between the trustee of the SMSF and the related party (sec 71 SIS) must be drawn up. We would recommend a solicitor to be engaged to draw up a commercial, fully documented, lease agreement between the SMSF trustees and the business.  Rent should be specified in the contract to be payable at a market value from the business to the SMSF and also, for example, outlining the consequences of not paying rent on time. Rent should also be adjusted regularly in future years to ensure that rent paid is always at market value.

Capital Gains Tax

Capital Gains Tax may not be payable on the sale or transfer into the SMSF of an existing property dependant on whether the business premise is used in the related parties business and if they pass the Small Business CGT Concessions. The Capital Gain may also be reduced in certain circumstances by the member making a concessional contribution into the SMSF and claiming a deduction to offset the gain.

Once the members’ of the SMSF turn 55, they can also commence a pension (transition to retirement income stream), and may not be subject to capital gains tax on the subsequent sale of the property. This is a major benefit to business taxpayers that cannot access the small business capital gains tax concessions. Because the tax on the gain is not apportioned between the years the property is increasing in value whilst they are in accumulation phase and the years in pension phase, once a pension has commenced the capital gains on sales of assets within the SMSF become tax free.

If the property is disposed of by the SMSF before pension phase has commenced, and  the building has been held for longer than 12 months, the tax on any capital gain is still concessionally taxed in the SMSF at only 10%.

Stamp Duty

Stamp duty may also be payable in some States when the property is transferred to the SMSF and dependant on how the transaction is structured.

 Income Tax

Rental income less outgoings are taxed in the SMSF at 15 cents in the dollar.  The rental expense in the business if it is a corporate taxpayer receives a tax refund of 30%, saving 15 cents in every dollar of tax paid by the family overall. This saving rises to 30 cents in the dollar once the members commence pension phase.

Other Issues

The property should also be valued in the SMSF each year on a reasonable basis.  An annual independent valuation is not required, and normally a curb side valuation by a real estate agent is sufficient.  If the SMSF is in pension mode, the property and the SMSF assets need to be valued at market value each year to continue to qualify for the generous taxation concessions for SMSF’s in pension mode.  To continue to qualify for these concessions, a market valuation by a formal valuer every three years would be best practice with curbside valuations in between.  The value should always be compared to the Council rates notice.  If the SMSF is not valued at market value, then the SMSF may not qualify for the pension concessions and all income will be taxed at 15%.

Having the property in a SMSF also forms an excellent barrier for asset protection purposes, removing exposure of the property to creditors and other inherent business risks. However, there are claw back provisions in the Bankruptcy Act for contributions made to defeat creditors.

SMSF’s lead both industry and retail funds because of the investments that only these funds can purchase. Although trustees take on more responsibility, they will continue to be the superannuation structure of choice in the future. Trustees need to seek advice prior to a final decision to pursue the strategy to insure that any pitfalls are identified and can be provisioned.

Written by Travis Allen CPA, Director, Hillyer Riches 

Understanding taxes and meeting your taxation obligations can save you time and money. By paying the right amount of tax, you can also avoid late payment penalties.

The Tax Office provides a free computer program to check whether you are ready to meet your tax obligations and to give you helpful information.

Do you know which tax registrations you need to apply for?

 Do you understand your recording keeping and information management requirements?
Under tax law, you must keep records of income tax, GST, payments to employees and other business payments for five years. There are also record keeping requirements for many other measures including workers compensation. Under the Fair Work Act 2009, you need to keep employee information such as time and wages records for seven years.

Do you know which Australian Government taxes you need to pay?

 Do you need to pay income tax?
Income tax is levied on the taxable income of a person or a business. You must lodge a tax return for any year in which you carry on a business. Depending on the structure of your business you may need to lodge a separate return for the business and for yourself as an individual taxpayer.

Do you need to pay goods and services tax (GST)?
GST is a broad-based tax of 10 per cent on the sale of most goods and services and other things in Australia. By registering for GST, you will also be entitled to claim input tax credits.

Do you need to pay Capital Gains Tax (CGT)?
CGT is the tax on any gain you make when you sell an asset such as shares, units in a unit trust, property and business assets, excluding most homes and motor vehicles.

Do you need to pay excise?
Excise duty is a tax levied on certain types of goods produced or manufactured in Australia.

Excisable goods include alcohol, petroleum, tobacco and coal.

Do you need to pay fringe benefits tax (FBT)?
FBT is paid on certain benefits employers provide to their employees or their employees’ associates in place of salary and wages.

Do you need to pay superannuation contributions for your employees?
Superannuation is payable at a minimum of 9 per cent of each eligible employee’s earnings base. Your employee’s earnings base is generally their ordinary time earnings.

Do you know which state, territory or local taxes you need to pay?
State, territory and local governments also have a number of taxes that may apply to your business.

Do you need to pay land tax?
Land tax is an annual state tax paid by the owner of commercial land, unless you are in the Northern Territory, where land tax does not apply.

Do you need to pay stamp duty?
Stamp duty is a tax on a range of paper and electronic transactions. Also known as transfer duty or general duty, these taxes vary across states and territories.

Do you need to pay rates?
Rates are property taxes charged by local government on properties in their municipal area.

Home-based businesses may need to inform their local government about the use of their property as a business premises.

Do you know which business tax deductions you can claim?
You may be able to claim certain deductions for your business expenses when you lodge your income tax return.

Do you know if you are eligible for the small business tax break and other concessions?
You may be eligible for the small business and general business tax break and other small business concessions for CGT, GST, FBT and pay as you go withholding (PAYG). The small business tax break is available on eligible assets purchased by 31 December 2009.

Do you know how to lodge an income tax return for your business?
You must lodge an income tax return each year you are in business – even if you do not make a profit or have no tax to pay.

Do you know how to report your tax obligations?
To report and pay your taxes throughout the year including GST, PAYG and FBT, you will need to lodge a business activity statement (BAS).

•  You can register to lodge online through the Business Portal at

 Do you know how you can pay your business tax?
Once you have lodged your income tax return or activity statement, you can pay your tax by BPAY, direct credit, direct debit, mail or in person at the post office.

Do you know which laws apply to your business?

•  There are a number of legal requirements businesses must comply with, which include

Australian, state, territory and local government laws, licences, registrations and leases.

•  Consult a business adviser, accountant or solicitor for advice.
•  Consult your industry association or employer group.

 Do you understand the Trade Practices Act 1974 (TPA) and state and territory fair trading laws?
The objective of the Trade Practices Act 1974 is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection. The TPA prohibits conduct by business that is misleading or deceptive, provides product safety standards, makes manufacturers and importers liable for defective goods and prohibits unconscionable conduct by businesses in their dealings with consumers.

The TPA also prohibits anti- competitive conduct (restrictive trade practices) such as agreements, mergers or acquisitions that substantially lessen competition, market sharing, price fixing, misuse of market power or resale price maintenance. State and territory fair trading laws also protect business and consumers from unfair trading practices.

Do you understand retail leasing laws?
If you intend to obtain or have a leasing agreement, you need to know what questions to ask before signing and where to look for more information.

•  Consult a business adviser, accountant or solicitor for advice.

See our website www.shelcom.com.au or email gabriel@shelcom.com.au