And the good news is… if your business has an annual turnover of $10 million or less, you should have less tax to pay on your 2017 return.
That’s because the Australian Taxation Office lowered the company tax rate to 27.5% for the 2016–17 income year for businesses with a turnover of less than $10 million that have operated for all or part of the year.
The threshold of $10 million will increase to a turnover of $25 million for the 2017-2018 financial year.
If you’re earning $10 million or less, (or $25 million in the 2017-18 year), the maximum franking credit you can allocate to a frankable distribution has also been reduced to 27.5%.
Beware of Aggregation
It’s important to understand that when the ATO uses the term ‘turnover’ it’s referring to your ‘aggregated turnover’. That means the turnover you declare must include your annual turnover, plus the annual turnover of any other entity that is connected or affiliated with your company, whether it’s based in Australia or overseas.
For example, if you operate a company that operates two arms – one for project construction and a second for project management, then you need to include income from both activities when working out your annual turnover.
If you operate an art gallery and you offer secretarial services on the side, your aggregated turnover will be the annual turnover of the gallery and the annual turnover of the secretarial services you provide.
Importantly, if you and your marital partner operate individual companies which are connected by a controlling company, of which you and your partner each own 50% shares, your aggregated turnover will be the annual turnover of your business plus the annual turnover of the controlling company.
Head to MyTax
In other useful news, the ATO has replaced e-tax with myTax, a convenient service for individuals and sole traders that enables tax returns to be lodged online. According to the ATO, myTax has been “upgraded to do everything e-tax could do, plus more”.
myTax is web-based so you don’t need to download anything and you can lodge from a range of devices. It pre-fills information provided to the ATO by employers, banks and other government agencies and lets you include investments, rental properties and capital gains.
Finally, if you’re interested in finding out more about how to manage your tax and your business, the ATO offers small business workshops in Australia’s capital cities. Webinars are also available.
Or, you could simply contact Ayers… we have experts on hand to help you manage your administrative obligations so you can get back to building your business. We can advise you on pay as you go and salary packaging, financial planning, novated leasing, your tax obligations and more.
Get in touch today: 1300 767 391