Company tax returns are filed by big businesses which have multiple owners and sophisticated financial arrangements. If you are the sole owner of a small proprietary business, then you will have to file a sole trader tax return. This type of tax return is filed by the “sole” owner of a small business which does not meet the Australian Taxation Office’s (ATO) for a company tax return. Sole traders have to keep in mind two distinct types of taxes when they are filing the tax returns for their business. You will have to think about the Goods and Services Tax (GST) and the Income Tax at the same time while filing your taxes and applying for tax deductions and refunds.
How Sole Traders Are Connected With the GST
In Australia, the GST is an ad valorem 10% tax that is placed on almost all goods and services that can be purchased in Australia. If your business earns more than 75000 AUD annually or if you drive a single taxi, then you shall have to register for GST as well. While calculating the part of your income that is taxable, you can leave out the GST that is charged on your earnings. Instead, the GST will be part of your Business Activity Statement or BAS.
What Should You Need To Report To The ATO?
Even if your business’ income is below the tax-free income threshold, you will have to submit the individual tax return form and the business item schedule form to the ATO. Here are some of the documents and paperwork that you need to get sorted out before you file your sole trader income tax return with the ATO.
- Business Income: Business income covers the total earnings of your business over the course of a particular time period. Generally, the ATO will want the total income of your business over the course of the financial year. However, it is good to segment the paperwork according to the quarter of the year. Not only does it simplify things for you but it also ensures that you don’t miss out any important documents.
- Additional Income: Additional income that you need to report will account for all the extra payment that you receive in the form of salaries, wages, bond payments, rent, dividends, etc. For example, dividends will be paid to you by any companies whose stock you hold and bond payments will be made by the entity you choose to purchase the bond from. These should also be segmented according to the quarter for convenience.
- Any and all tax deductions you can make: You can also file paperwork for any tax deductions that will entitle you to a significant amount of money in the form of refunds. For example, you can be entitled to refunds on your phone bills, internet bills, etc. as you have to use the phone and the internet fairly regularly during the course of your business. You can also file for tax deductions for any motor vehicle costs as well.
Ways to Complete the Sole Trader Tax Return
After you have prepared all the paperwork and the necessary documents, you have to file the return with Australian Taxation Office. There are a number of ways in which this can be done. Here are the various ways in which you can go ahead and file your sole trader tax return.
- Through a Tax Agent: A registered tax return accountant or agent can be very helpful to have while filing taxes. They will prepare the documents for you and will also lodge the tax return with the ATO on your behalf, acting as your representative. The biggest advantage of soliciting their services is the fact that they are well acquainted with the bureaucratic red tape involved in the filing and deductions process. Not only will they prepare all your documents and lodge the return with sufficient time to spare, but they will also ensure that you can get all the deductions and refunds that you are eligible for. You might have to pay them a fee but the fee is well-worth it when you consider the money you save in tax refunds.
- Pay As You Go (PAYG) Instalments: It is very important to remember that sole traders are responsible for filing their own tax returns, which is not true for normal employees who work for a regular salary. The ATO allows sole traders to make their tax payments in the form of PAYG instalments over the year by making fairly accurate estimations of their future taxable income. The PAYG bill can be calculated using a PAYG calculator.
Best tax agents can help you
For the best results, you should solicit the services of the best tax agent Perth has to offer. They can massively simplify the job for you and make sure that you save a large amount of money by applying for deductions, reimbursements, exemptions, etc.
