In Perth City, a sole trader is one of the most common small business structures. Apart from partnerships, companies, and trusts, it is a popular choice among entrepreneurs. It provides ease of setup and control over operations. A unique feature of sole trader business tax return services in Perth City is that the owner and the business are legally the same entity. At the time of lodging your tax return, you need to submit a single tax return covering your personal as well as business income.
Essential Considerations for Sole Trader Business Tax Return Services in Perth City
However, it is a simple setup. This doesn’t mean lodging your tax return as a sole trader is without complexity. You need to understand how the Australian tax system works and how it applies to your business income. It is crucial for staying compliant and making smart financial decisions. Before filing tax returns, you must keep in mind the following points:
Australian Income Tax System for Sole Trader Business Tax Return Services in Perth City
There is a self-assessment tax system in Perth City. When you give your income and deduction details to the Australian Taxation Office (ATO), they assume the information is correct at first. However, the ATO can later check your return and ask for proof. So, you should keep thorough and accurate records of all business-related transactions, income, and expenses. Proper record-keeping helps ensure that if the ATO ever questions your claims, you can validate them with ease.
Consider Assessable Income
When preparing your tax return, it is important to distinguish between what qualifies as assessable income and what does not. Assessable income refers to the money you earn from business activities, such as selling goods or providing services. It includes profits and gross earnings of your registered business.
But extra income from other sources is not included in it. For example, any GST collected, personal funds you have put into the business, or money borrowed to run the business. You should not consider these as assessable incomes and need to exclude them from your calculations.
Prioritise Deductions as a Sole Trader
Sole traders can reduce their taxable income if they claim deductions for business expenses. Common deductible expenses include advertising, business-related travel, electricity, and operating costs. Also, you may claim a reduction on business equipment such as machinery, computers, and tools. However, not all expenses qualify.
You can not claim costs related to personal use, such as holidays, family loans, or personal usage of office equipment. Also, if you include GST in your cost, you must ensure it is excluded from the deductible amount when you are registered for GST. For clarity and accuracy: Many sole traders consult specialised tax professionals to avoid costly errors.
Pay as You Go Installments
After the first financial year of your business, you may need to make PAYG (Pay As You Go) installments. Your first lodged tax return shows that you have made a profit from your business or investments. Then, the ATO will notify you if you need to start paying PAYG installments. You can make these payments quarterly or annually.
The installments you pay throughout the year will be credited toward your total tax liability after you lodge your tax return. Managing your cash flow is critical here. When you are new to running a business, consider setting aside funds or making voluntary contributions to stay ahead of your tax obligations. The ATO provides various PAYG withholding tables that can guide you in estimating how much tax you may owe.
Claim Tax Losses As a Sole Trader
In some years, your deductions may exceed your assessable income. It will result in a tax loss. If you are earning a salary or income from other sources, you might be able to offset this loss against that income. But you must meet specific ATO criteria. If you don’t qualify to balance the loss immediately, you can carry it forward. Besides, you can use it in future years when your business starts making profits.
For professional assistance with sole trader business tax return services in Perth City, you can get help from Super Fund Accountants. Our professionals ensure you don’t miss out on any eligible deductions or offsets. They offer a free consultation before lodgement in regions like Applecross, Brentwood, Mosman Park, Ardross, Nedlands, Murdoch, Bullcreek, Winthrop, Booragoon, Bicton, Shelley, Rossmoyne, Willetton, Melville, Myaree, Canning Vale, Fremantle, West Perth, and Subiaco. When it comes to lodging your first tax return as a sole trader or needing help navigating tax laws, their support can save you time, stress, and money. Reach out to us to learn in detail.
