As a business owner you have a number of responsibilities to various Government Organisations and also to the public. You are bound by laws from local, state and federal levels as well as organisational bodies.
In this blog we will cover your main obligations to the Australian Taxation Office (ATO) and Australian Securities and Investment Commission (ASIC) for a business owner and specifically a Director of a company.
Australian Taxation Office – ATO
Income Tax Returns
Depending on your structure this could be an Individual (if you are a Sole Trader), Trust or Company return. It will record the businesses income, expenses, various details of those expenses and various aspects of the assets and liabilities of the business, how income has been paid out or distributed and other items the ATO requires information for. These are due annually and due dates vary depending on if you are registered with a Tax Agent and if your previous returns are up to date.
Business Activity Statement (BAS)
Your BAS will be due either monthly or quarterly (in a small number of cases Annually, although we recommend Quarterly to keep on top of cash flow).
A BAS records several taxes and instalments towards these including where applicable:
- Goods and Services Tax (GST)
- Pay as You Go Withholding (PAYG WH) and Salaries/Wages paid
- Pay as You Go Instalments (PAYG I) – being instalments towards the tax for the trading entity (usually a company)
- Fringe Benefit Tax (FBT) Instalments
- Fuel Tax Credits
Fringe Benefits Tax (FBT)
Fringe Benefits Tax is a tax on employers where they provide employees with benefits other than their salary and wages. It can include things such as personal use of a motor vehicle, entertainment benefits, providing of loans etc.
Where these benefits are provided and there is no exemption Fringe Benefits Tax must be paid at the top tax rate. This is a complex topic that we suggest you discuss with your Accountant/Advisor to ensure you are meeting your obligations and not paying tax where it is not necessary.
Financial Statements
These need to be prepared in accordance with relevant Corporations Law, Taxation Law and International Standards where appropriate. It is almost impossible to meet your Income Tax obligations without a complete and accurate set of financial statements.
In most cases, you are not required to supply this to the ATO. The details are included in your relevant Income Tax Return.
Superannuation (for Employees)
As a business owner, you are required be registered for Super Stream to record and pay your employees Superannuation payments. Superannuation is due by 28th of the month following the end of the quarter. Please note the superannuation needs to CLEAR the employee’s account by this date. Amounts not paid on time will incur interest and penalties and become not deductible (ever!). There is also a long form that needs to be completed for each employee if you are even 1 day late.
Australian Securities & Investment Commission (ASIC)
Obligations for a Director under the Corporations Act
A Director is responsible for the company and exercising the care, skill and diligence that a reasonable person would exercise if they were in the position.
Generally, a director must
- Be honest and careful in dealings at all times
- Know what the company is doing
- Take extra care if the company is operating a business that handles other people’s money
- Make sure that the company can pay its debts on time
- See that the company keeps proper financial records
- Act in the company’s best interest, even if this may not be in the directors own interests
- Use any information you get through the position of director properly in the best interests of the company
Please be aware that the ATO can issue Director Penalty Notices (DPNs) for unpaid PAYG Withholding and 9.5% Super Guarantee Charge to directors personally. Directors are personally liable for these costs even if a company goes into administration/liquidation. Please also be aware of where you have signed Director’s Guarantees with suppliers for items on account. These are quite common and mean that the Director is personally liable for the debts incurred by the company.
It is also imperative a director does not allow a company to trade while insolvent. The definition of ‘insolvent’ is if a company cannot pay its bills ‘as and when they become due’.
ASIC will issue an Annual Statement for each year where details need to be checked and any changes updated. There is a fee of around $245 to be paid each year with this to keep your company current, it is important you pay this on time as the penalties for late payment are high and rarely reversed.
The above summarises the basic obligations you have with the ATO and ASIC as a business owner and company director when running a business.
As always we advise you seek specific independent advice from your Accountant/Advisor for your specific situation.
