Understanding Taxation And Your Business Entity With Sydney Accountants
Whether you running an SME, are in a partnership or a sole trader, the calculation of tax will differ. Taxation compliance and the calculation of tax varies markedly dependant upon the type of business entity. Any new or existing business should stay well informed by their Sydney Accountants of the laws to ensure that compliance needs are met. Taxation and accounting laws vary from state to state. Where possible it’s always a good idea to check on the ATO website for more information. There are plenty of accountants in Sydney who are willing to help local SMEs and small businesses in this matter.
Sole Traders
Going at it alone and working for yourself may seem intimidating at first, but it can also be deeply rewarding. Getting the tax and accounting part right is the bread and butter part of running a business as a sole trader. Sole traders declare their business income (or loss) within their personal income tax and pay individual tax rates. Call on the experience and expertise of City Tax Accountants Sydney, to have all of your sole trader financial needs addressed under one roof.
For sole traders, partnerships and companies, the ATO will assess whether or not these business entities should be using PAYG instalments. Instalments that are paid to the ATO are then credited against the income tax assessment. This happens when you lodge the tax return at the end of the fiscal year.
Sole traders and other entities should always be mindful of income tax that they need to pay. Either by setting aside this money in a separate account, or arranging to make voluntary payments to the ATO. Another important factor to being a sole trader is making voluntary and regular payments into Superannuation. This is a much neglected and tedious part of working for oneself, that is often overlooked.
Companies
In contrast to sole traders and partnerships, companies are a legal entity unto themselves. They therefore have their own tax liability and pay company tax. The current rate for company tax is 30%, this is applied to assessable income or profits of the organisation. Unlike sole traders, a company has no tax free threshold. The owners and directors declare their salary, directors fees, dividends and wages that they receive from the company and lodge these with the ATO. They then pay tax according to individual tax rates. It is complicated and complex to work out this information, that’s why there are plenty of accountants and accounting firms Sydney and in all of the other capitals of Australia.
Partnerships
Partnerships must always lodge a tax return, however the partnership entity itself doesn’t pay tax. Instead, each partner pays tax on their portion of the net partnership income. The amount of tax then paid by the individual partners will vary according to individual tax rates. In the same way as sole traders, PAYG instalments are credited against personal income tax assessments.
Trusts
As a trust holds income or property for the benefit of its beneficiaries. There is no tax liability in most cases. This is because the net trust income is distributed to resident adult beneficiaries. Each beneficiary pays tax on their share of the trust income and profit; this will occur using the tax rates of these individual beneficiaries.
Questions to Ask Your Accountant
When getting your accountant to check over a profit and loss statement, the main part of the document that will catch your attention is the bottom line. How much money is being made in the past year and how much looks to be made in the future. To do this is to miss out on a veritable wealth of other information. Asking the right questions to your accountant will enable you to keep on top of the game and improve profit margins next year.
Is My Business in A Good Position Financially?
In recent years, there has been much fretting and worrying in all sectors about the economic downturn. The question of whether or not you can weather out the storm is a pertinent one to ask to your accountant. Speak with some local Sydney Accountants and find out who will measure the debt to equity ratio. Of course, do some research into their business, ensure that they are institute chartered accountants Sydney, Melbourne and all the other state capitals have plenty of them. A good CPA will show the proportion of capital invested by business owners compared to the funds provided by external lenders. This will give a glimpse into how much of the business is financed by the owners versus financed by liabilities and debts. As a general rule, this should be a ratio of 1:1 to 4:1. Another way of putting it, is a debt ratio of $4 to $1 of equity. Too much debt indicates that there is a lot of financial risk involved.
How Do I Improve Cash Flow?
This is where collections and credit control come into play. This isn’t just for the big utility companies who call their overdue customers. Credit control is an important part of any business, even SMEs and sole traders. A business that has provided goods and services, have every right to being paid. One way of mitigating against risk, is to create payment terms and remind overdue customers with a friendly phone call. This is one very effective way of generating cash flow, but there are also many others. The time poor business owner in Sydney should get on the phone to a tax accountants Sydney CBD. The right one will be helpful, approachable and go out of their way to provide information over the phone or in person.
What are the component parts of ‘Cost of Goods’ sold (COG)?
When producing a sale, there are going to be other production costs associated with the sale. These are all factors and components of the cost of goods (COG). Knowing about COG will enable business owners to understand where money is being spent, and if possible reduce this. By reducing the COG, the gross profit will be higher. For some information about COG and the components and details of this, speak with the experienced and affordable City Tax Accountants Sydney
How does my business stack up against the competition?
Any SME or sole trader that wants to succeed needs to do their own market research into what their competition is doing. One part of this is financial research into the marketplace and industry averages. This practice is called benchmarking. A competent and experienced Sydney accountants like City Tax Accountants in Sydney will be able to guide you to find the best data about business competition, and know how to interpret this data. Doing so will spotlight areas of your business that may need some TLC.
Help Is Close At Hand
Sydney is known as the Australian capital of finance and accounting. There are countless accountants in Sydney, but only a handful are worth the time of day. Be sure to look at accountants sydney NSW and accountants Sydney CBD in order to get a local and experienced accountant that won’t cost the earth.
