Section 2 Business Structures: Sole Trader

Australian Accounting and Bookkeeping
Section 2 Business Structures

If you're thinking of starting a business, you’ll need to look at the
advantages and disadvantages of each different business structure and
work out which structure best suits your needs. Before deciding which
business structure to use, it’s important you seek advice from a
professional business adviser, a lawyer or an accountant.
Sole Trader
A sole trader is an individual running a business and is legally responsible
for all aspects of the business, including any debts and losses, which
can't be shared with others. It is the simplest and cheapest business
structure. If you operate your business as a sole trader, you are the only
owner and you control and manage the business.
You are legally responsible for all aspects of the business. Debts and
losses can't be shared with other individuals. You can employ workers in
your business, but you can’t employ yourself.
As a sole trader, you'll generally make all the decisions about starting
and running your business, although you can employ people to help you.
You are also responsible for paying your worker's super as well as for
your own. You may choose to pay it into a fund for yourself to help save
for your retirement.
As a sole trader, you:
• use your individual tax file number when lodging your income tax return
• report all your income in your individual tax return, using the section for
business items to show your business income and expenses (there is no
separate business tax return for sole traders)
• apply for an ABN and use your ABN for all your business dealings
• register for Goods and Services Tax (GST) if your annual GST turnover is
$75,000 or more
• pay tax at the same income tax rates as individual taxpayers and you
may be eligible for the small business tax offset
• put aside money to pay your income tax at the end of the financial year -
usually, you will do this by paying quarterly Pay As You Go (PAYG) instalments
• claim a deduction for any personal super contributions you make after
notifying your fund.
As a sole trader you can't claim deductions for money 'drawn' from the
business. Amounts taken from the business are not wages for tax
purposes, even if you think of them as wages.
Learning Guide V1.0 © AAMC Training Group 3

Key Aspects
• Is simple to set up and operate.
• Gives you full control of your assets and business decisions.
• Requires fewer reporting requirements and is generally a low-cost structure.
• Allows you to use your individual Tax File Number (TFN) to lodge tax returns.
• Has unlimited liability - all your personal assets are at risk if things go
wrong. Your assets can be seized to recover a debt.
• Any losses incurred by your business activities may be offset against

other income earned (such as your investment income or wages), subject
to certain conditions.
• Doesn't require a separate business bank account, unlike a company

structure. You can use your personal bank account but must keep
financial records for at least 5 years.
• As the business owner, you're not considered an 'employee' of the

business. You should pay yourself, which is usually a distribution of your
profit, but this is not considered 'wages' for tax purposes.
• If you're a business owner without employees, there's no obligation to

pay payroll tax, superannuation contributions or workers' compensation
insurance on income you draw from the business. You can choose to
make voluntary superannuation contributions to yourself though, to help
you build up your superannuation.
• You can employ people to help you run your business. There are
compulsory obligations that you must comply with, such as workers'
compensation insurance and superannuation contributions.
• It's relatively easy to change your business structure if the business

grows, or if you wish to wind things up and close your business.
• You can't split business profits or losses made with family members and
you're personally liable to pay tax on all the income derived.
Before deciding on your business structure, it is important to seek

professional advice from a business adviser, solicitor or accountant to
ensure the structure you choose meets your personal circumstances and
business objectives.
Personal Services Income (PSI)

If you're paid mostly for your personal efforts, skills or expertise, you
might be receiving personal services income (PSI) and you may have to
treat deductions in relation to this income differently.

Company
A company is a separate legal entity and is a complex business
structure, with higher set-up and administrative costs because of
additional reporting requirements, unlike a sole trader or a partnership
structure. This means the company has the same rights as a natural
person and can incur debt, sue and be sued.
A company is run by its directors and owned by its shareholders. While a

company provides some asset protection, its directors can be legally
liable for their actions and, in some cases, the debts of the company.
The company’s shareholders can limit their personal liability and are
generally not liable for company debts.
You need to register a company with the Australian Securities and

Investments Commission (ASIC). Company officers and directors must
comply with legal obligations under the Corporations Act 2001.
Key features
In this business structure, the company:
• has limited liability compared to other structures
• is a more complex business structure to start and run
• must apply for a tax file number (TFN) and use it when lodging its annual
tax return
• is entitled to an ABN if it is registered under the Corporations Act 2001. A

company not registered under the Corporations law may register for an
ABN if it is carrying on an enterprise in Australia
• must be registered for GST if its annual GST turnover is $75,000 or

more. The registration threshold for non-profit organisations is $150,000.
• owns the money that the business earns - the individuals who control the
business cannot take money out of the business, except as a formal
distribution of the profits or wages
• must lodge an annual company tax return
• usually pays its income tax by instalments through the Pay As You Go
(PAYG) instalments system
• pays tax at the company tax rate and may be eligible for small business
concessional rates.
• requires an annual company tax return to be lodged with the ATO
• must pay super guarantee contributions (SGC) for any eligible workers.
This includes you, if you are a director of the company, and any other
company directors

Personal services income (PSI)

If you have a company structure and the income the company receives
is mostly for your personal efforts, skills or expertise, you need to work
out if the personal services income (PSI) rules apply. If the PSI rules
apply, the income will be treated as your individual income for tax
purposes. This will also affect the deductions you can claim.
Partnership
A partnership is a business structure that involves a number of people
who carry on a business together and distribute income or losses between
themselves. For example, if you and a friend or family member decide to
set up a business together, you might operate it as a partnership.
You may choose a partnership over a sole trader structure for example,
if you'll be jointly running the business with another person or a number
of people (up to 20). There are two types of partnerships - general and
limited. Partnerships are governed by the relevant law depending on
your state or territory:
• ACT - Partnership Act 1963
• NSW - Partnership Act 1892
• NT - Partnership Act 1997
• QLD - Partnership Act 1891
• SA - Partnership Act 1891
• TAS - Partnership Act 1891
• VIC - Partnership Act 1958
• WA - Partnership Act 1895
A written partnership agreement is not essential for a partnership to

exist, but is a good idea. A partnership agreement should outline how
income or losses will be distributed to the partners and how the business
will be controlled.
A partnership agreement can help prevent misunderstandings and

disputes about what each partner brings to the partnership, and what
they are entitled to receive from the income of the business. This is
particularly important for tax purposes if the profit or losses are not
distributed equally among partners.
Key Aspects
• It's relatively easy and inexpensive to set up.
• It requires a separate Tax File Number (TFN) which can be essential for
lodging an annual partnership return showing all income and deductions
of the business

• If you are carrying on an enterprise, you can apply for an Australian

Business Number (ABN) but this is not compulsory. ABN must be used
for all business dealings.
• It's not a separate entity - like a sole trader, you and your business
partners are personally liable for the debts of the business.
• You have shared control and management of the business with your partners.
• The partnership doesn't pay income tax on the income earned. You and
each of your partners pay tax on the share of the net partnership
income you each receive.
• Requires a partnership tax return to be lodged with the Australian
Taxation Office (ATO) each year.
• Each partner is responsible for their own superannuation arrangements -
you are not an employee of the partnership.
• You must be registered for GST if the annual income turnover is
$75,000 or more.
Personal services income (PSI)

If you are paid mostly for your personal efforts, skills or expertise, you
may be receiving personal services income (PSI) and you may have to
treat deductions in relation to this income differently.
Trust
A trust is an obligation imposed on a person - a trustee - to hold
property or assets (such as business assets) for the benefit of others,
known as beneficiaries.
Setting up a trust can be expensive as a formal deed is required

outlining how the trust will operate and there are formal yearly
administrative tasks for the trustee.
A trustee is legally responsible for the operation of the trust. The trustee can
be an individual or a company. Profits from the trust go to beneficiaries.

Key Aspects
• can be expensive to set-up and operate.
• require a formal trust deed that outlines how the trust operates.
• require the trustee to undertake formal yearly administrative tasks.
• if you operate your business as a trust, the trustee is legally responsible

for its operations. A trustee of a trust can be a company, providing some
asset protection.
• must have its own tax file number (TFN) for lodging its annual tax return
• must apply for an ABN and use it for all business dealings
• must be registered for GST if annual GST turnover is $75,000 or more
• may be liable to pay tax depending on the wording of its deed and
whether any income the trust earns is distributed to its beneficiaries
• may be able to access small business tax concessions
• must pay super for any of its employees (this may include the trustee if
they are also employed by the trust)
Knowing the main features of a trust business structure may help you
decide if this structure is best for your business.
Who pays income tax?

While a trust must lodge an annual tax return, whether the trust pays
tax (or not) is determined by how the trust income is distributed:
• if all trust income is distributed to adult resident beneficiaries, the trust is not
liable to pay tax – each beneficiary reports the income in their own tax return
• if all or part of the net trust income is distributed to non-residents or

minors, the trustee is assessed on that share on behalf of the beneficiary
– these beneficiaries may need to declare their share of the trust's net
income in their own income tax returns, and can claim a credit for the tax
paid on their behalf by the trustee
• where the trust accumulates net trust income (does not distribute it), the
trustee is assessed on that accumulated income at the highest individual
tax rate.
Personal services income

If you have a trust structure and the income the trust receives is mostly
for your personal efforts, skills or expertise, you need to work out if the
personal services income (PSI) rules apply. If the PSI rules apply, the
income will be treated as your individual income for tax purposes. This
will also affect the deductions you can claim.

Self-Managed Superannuation Funds (SMSF)

SMSFs are a way of saving for your retirement. The sole purpose test
requires that SMSFs are maintained for the purpose of providing benefits to
members upon their retirement, or to their dependants if a member dies.
As a trustee of a regulated superannuation fund, you must comply with the

sole purpose test for the SMSF to be eligible for superannuation tax
concessions. The sole purpose test is divided into core and ancillary purposes.
Core Purpose
An SMSF must be maintained to provide benefits for each member of
the SMSF on or after at least one of the following:
• The member’s retirement
• The member reaching an age not less than prescribed in regulations
• The member’s death, if the death occurred before they retired, and the
benefits are provided to their dependants or legal personal representative
or both
• The member’s death, if the death occurred before they attained an age
not less than prescribed in regulations, and the benefits are provided to
their dependants or legal personal representative or both
Ancillary Purpose
Ancillary purposes for maintaining an SMSF are to provide benefits for
members in the following circumstances:
• Termination of a member’s employment with an employer who made

contributions to the SMSF for that member
• On the cessation of work due to ill health
• Death of a member after retirement where the benefits are paid to their
dependants or legal personal representative or both
• Death of a member after reaching an age not less than prescribed in

regulations where the benefits are paid to their dependants or legal
personal representative or both
• Another ancillary purpose approved in writing by the regulator
This allows an SMSF to provide benefits in situations of financial hardship

and/or on compassionate grounds, subject to the SIS Act, the governing
rules of the SMSF and the approval of the appropriate regulator.

Types of Contributions
Concessional contributions are generally contributions made for you or
by you for which a tax deduction is claimed and are included in the
assessable income of the SMSF. They include:
• Superannuation guarantee (SG) contributions
• Contributions made by employers over and above the SG or award

obligations, including salary sacrifice contributions
• Payments by the ATO of SG shortfall amounts
• Contributions paid pursuant to an award/agreement certified by an

industrial authority
• Personal contributions for which a tax deduction is claimed
Non Concessional Contributions (NCCs) are contributions that are not

assessable to the SMSF and include:
• Personal post tax contributions
• Spouse contributions
• Certain amounts of an overseas transfer
• Excess concessional contributions above the concessional contribution

cap which are not refunded
Investment Restrictions
There are various restrictions and requirements placed on how an SMSF
may invest its assets. These are designed to protect members’ benefits.
The main ones are:
• Sole purpose test
• Trustee covenants concerning investment of member’s money
• Borrowing restrictions
• Regulations applying to investments in collectibles and personal use assets
• General prohibition on giving a security over fund assets
• Prohibition on loans to members
• Non arm’s length investments
• Acquisition of assets from related parties
• In house asset provisions
• Written investment strategy

There are required conditions that must be met to classify a

superannuation fund as SMSF. These requirements are the following:
• Maximum number of members is 4
• Each member of a SMSF must also be a trustee of the fund, and all
trustees must be members (except when a non-member trustee for a
single member fund)
• A SMSF trustee cannot receive payment for performing the role of trustees
• No member of a SMSF can be an employee of another member, unless

they’re relatives (‘relative’ has a specific definition)
Gaining greater control over super savings is probably the main reason
why SMSF trustees want to start a SMSF. Other typical reasons are:
• Control over your fund’s investment strategy and a greater choice in

what you can invest in, including direct property and collectibles such as
works of art.
• A belief you can do a better job investing your super money than your
existing fund’s trustees, and at a lower cost. How much do you think
does a DIY super fund cost?
• The ability to take advantage of tax benefits linked with super.
• Flexibility in when and how you fund your retirement, including starting a
superannuation pension.
• Opportunities to purchase business property, such as an office, within the

SMSF, and to use the property in your business.
• For the purposes of greater control over your estate planning. Any death
benefits paid from your fund to your dependants (under the tax laws) are
tax-free, and a benefit payments tax is payable on super benefits paid to
your adult children.
Business and Company Registrations

If you're applying for an Australian business number (ABN), you can also
apply for a business name and register for secure online authentication
and taxes, like GST and PAYG withholding, at the same time.
As not everyone is entitled to an ABN, you will be asked a series of

questions when applying for one to determine your entitlement.
If you're setting up business as an individual (a 'sole trader'), it will speed

things up if you provide your tax file number (TFN) when you apply.
Companies should provide their Australian company number (ACN).

Australian Business Number

The ABN is a unique 11 digit number that identifies your business to the
government and community. It doesn't replace your tax file number, but
it is used for various tax and other business purposes.
Not everyone needs an ABN. To get one you need to be carrying on an

enterprise. If you apply for an ABN and you're not entitled, your
application may be refused. You'll be sent a letter explaining why.
With an ABN you can:
• confirm your business identity to others when ordering and invoicing
• avoid Pay as You Go (PAYG) tax on payments you receive
• claim Goods and Services Tax (GST) credits
• connect to Manage ABN Connections or get an AUSkey to transact online

with government agencies
• claim energy grants credits
• obtain an Australian domain name
You can register for a business name at the same time as your ABN
application. If you choose not to register for both at the same time you will
need to go to the Australian Securities and Investments Commission (ASIC)
to register your business name. You can do this after you get your ABN.
Business names are administered by the Australian Securities and

Investments Commission (ASIC). As your registered business name may
sometimes be referred to as an Australian business name or trading
name, it's important to understand the difference between your
Australian Business Number (ABN) and your registered business name.
Business names
The national business names registration service has replaced state and
territory services, meaning you only need to register your business
name once with a single national register. The new service commenced
on 28 May 2012 and is managed and administered by the Australian
Securities & Investments Commission (ASIC).
If your business does not operate under its own entity name (e.g. GLM Pty
Limited) or your name (e.g. Jane Smith), you will need a registered business
name. To apply for a registered business name you will need to have (or be
in the process of applying for) an Australian Business Number (ABN).
If you have registered a new business name, the Australian Business

Register (ABR) and ABN Lookup will automatically update with this
information. To register for, update or cancel a business name, you will
need to go to the ASIC website.

Trading names
As of 28 May 2012, the Australian Business Register (ABR) no longer

collects or updates trading names.
Trading names that were collected prior to 28 May 2012 will continue to
be displayed in ABN Lookup and the ABR until October 2018, but can no
longer be updated. This is to allow time for the business community to
adjust to the new business name system and to take steps to register a
business name which may have previously been unregistered.
From November 2018, ABN Lookup will cease displaying all trading
names and only display registered business names. As of 28 May 2012,
the Australian Business Register (ABR) no longer collects or updates
trading names. You may need to register for a business name.
Entity (legal) names
This is the name that appears on all official documents or legal papers.
Depending on the entity type, it may be one of the following:
• Individual/sole trader – your name
• Australian private company – the name registered with ASIC
• Australian public company – the name registered with ASIC
• Cooperative – the name as shown in the rules of the cooperative
• Strata title – the name registered with a State authority
• Other incorporated entity – the name registered with or incorporated

under the relevant State Act
• Partnership – the names of all the partners
• Superannuation fund – the name as shown on the superannuation fund

trust deed
• Trust – the name of the trust as shown in the trust deed
• Other unincorporated entity – the name by which your entity is usually

known, as stated on any formal documentation (such as bylaws, charter,
lodge orders, rules).
If you provide all the required information when applying online, you'll
receive an online notification of your ABN immediately after completing
your application. If your identity cannot be confirmed, or more
information is needed, the ABR will review your application within 20
business days. They may contact you if they need more information.

You must inform the ABR within 28 days of becoming aware of any
changes to your ABN registration details. Please note that when you
change your business structure you may also be required to register a
new ABN. When you make changes to your business, you may also need
to change your business name details. To do this, you must inform the
Australian Securities and Investments Commission (ASIC).
If you're closing your business, or changing your business structure, it's

likely you'll need to cancel your ABN. You'll need to cancel your ABN
when changing from a:
• sole trader to a company
• sole trader to partnership
• partnership to company
If you cease business, you will need to cancel your ABN. Before doing
this, make sure you've met all your lodgment, reporting and payment
obligations such as activity statements and PAYG withholding reports.
You can apply for or cancel an ABN, or apply to have an ABN you
previously held reissued:
• online using the Australian Business Register
• through your registered tax agent or BAS agent
ABN Lookup is the public view of the Australian Business Register (ABR).
It provides access to publicly available information supplied by
businesses when they register for an ABN
It is essential your ABN details are kept up-to-date. Many agencies

across all levels of government rely on ABN information to target and
provide important community services.
Inform ABN Lookup within 28 days if your business operation ceases or

if your details change. Your ABN may be cancelled if information shows
you are no longer carrying on a business.
From November 2018, ABN Lookup will cease displaying all trading
names and only display registered business names. If you wish to
operate under a different name to your legal/entity name, you will need
to register your business name with the Australian Securities and
Investments Commission.
Business names registered before 28 May 2012 may not currently appear
in ABN Lookup. However, you can update the ASIC register by adding the
ABN to your business name record if you wish to. You can do this using
ASIC's online service, ASIC Connect. Your updated business name record
showing your ABN will appear on the ASIC Connect Search portal once
your request has been processed, which may take several business days.

As you can no longer update your trading name with the Australian
Business Register (ABR), adding your ABN to your business name record
with ASIC is a way to show the link between your business and your ABN.
Australian Company Number

An ACN is a unique nine-digit number that every company in Australia
has. ACNs are managed by the Australian Securities and Investments
Commission (ASIC). You are automatically given an ACN when you
register a company with ASIC.
If your business is a company, then you'll need an ACN. By law, an ACN

must be shown on a number of documents, including:
• accounting statements, such as invoices
• any documents you lodge with ASIC
• receipts (if they're not machine generated, e.g. from a cash register)
• orders for goods and services
• business letterheads
• official company notices
• cheque, or any documents that represent a legal amount of payment
• written ads making a specific offer that can be accepted (such as by

completing an order form).
If your company also registers for an ABN, then your ACN will form part
of your ABN. In these cases, you won't need to display your ACN if your
documents already display your ABN and company name.
ACNs and Australian Registered Body Numbers (ARBNs) are 9 digit

numbers issued by Australian Securities & Investments Commission
(ASIC). An ACN is issued to an entity when it registers as a company
under corporations law. An ARBN is issued to an entity when it registers
with ASIC other than as a company, for example, foreign companies and
registrable Australian bodies.
Taxation Registrations
Tax File Number

All businesses need a tax file number. If you're going to operate your
business as a sole trader, your individual TFN is used for both your
business and personal dealings with the Australian Taxation Office (ATO).
If you don't have an individual TFN, you will need to apply for one. If
you're going to operate your business through a partnership, company,
trust or another type of organisation, it will need a separate TFN.

You can apply for a tax file number (TFN) online only if you are currently
in Australia and you have:
• a valid permanent migrant visa
• a valid visa with work rights
• a valid overseas student visa
• a valid visa allowing you to stay in Australia indefinitely.
Only one TFN will ever be issued to you. Once you have a TFN, you don't
need to re-apply for one if your circumstances change, for example, if
you change your name, have investments or claim government benefits.
If you know your TFN but wish to advise the ATO of changes to your
details, you can update some details online if you have a myGov account
linked to the ATO, or refer to update your details on the ATO website.
If you already have a TFN, complete this application if:
• you want to know what your TFN is and your details have changed since
you last applied
• you would like a copy of your TFN advice
• you need to confirm your identity details with the ATO.
Your TFN will then be sent to you.
You can apply for a business TFN:
• online, using the Australian Business Register – if you:
− only need a TFN, select the Applying for other registrations tab, and
then click Apply for a TFN for business link
− need a TFN and an ABN, apply for both by selecting the Apply for an
ABN link
• using a registered tax agent
• by lodging the Tax file number – application for companies, partnerships,

trusts and other organisations (NAT 3799) form. You can order this form
using the Australian Taxation Office’s online publication ordering service
for business.
If you're an Australian resident for tax purposes, and can attend an

interview at a participating Australia Post retail outlet, you can apply for
a TFN on the web. Use the Australia Post office locator to find out where
you can present your identity documents.

Otherwise, you'll need to complete a paper form Tax file number –

application or enquiry for individuals (NAT 1432). You can get a copy of
this form by:
• ordering online
• phoning 1300 720 092 (24 hours a day, 7 days a week)
• asking for one from Centrelink or the Department of Veterans’ Affairs if

you're applying for a government benefit or pension.
The form must be accompanied by documents which prove your identity

– your TFN won't be processed without these. Send the ATO certified
copies of documents – don't send original documents. Certified copies of
documents you mail to them may not be returned to you.
A full list of acceptable documents is provided in the instructions to the

form. If you can't find your TFN or aren't sure you have a TFN, check all
your correspondence from ATO, contact your registered tax agent, or
phone them on 13 28 61 between 8.00am and 6.00pm, Monday to Friday.
Note: Don't print and submit this online sample form – you must instead
complete the paper copy they provide when you order the form from them.
There are other ways to apply for a TFN:
• Foreign passport holders (permanent migrants or temporary visitors to

Australia) can apply for a TFN online at any time after entering Australia
• Aboriginal and Torres Strait Islander people can complete the form Tax
file number – application or enquiry for Aboriginals and Torres Strait
Islander people (NAT 1589).
Non-resident of Australia for tax purposes – you can apply for a TFN
using Tax file number – application or enquiry for individuals living
outside Australia (NAT 2628).
Note: The tests used by ATO to determine your residency status for tax
purposes are not the same as those used by other Australian agencies
for other purposes, such as immigration.
Goods and Services Tax

Goods and services tax, often known as GST, is a broad-based tax of
10% on most goods, services and other items sold or consumed in
Australia. GST applies to most Australian businesses and it's highly likely
that your business will be affected by the tax.
If your business is registered for GST, you'll have to collect some extra
money (one-eleventh of the sale price) from your customers and pay it
to the Australian Taxation Office (ATO) when it is due.

You need to register for goods and services tax (GST) if you:
• run a business or enterprise and your GST turnover is $75,000 or more

($150,000 or more for non-profit organisations)
• want to claim fuel tax credits for your business
• provide taxi travel.
As a business owner, it's your responsibility to register for GST if your

turnover exceeds the $75,000 threshold or is likely to exceed it.
The ATO advises that if you've just started a new business and expect it
to earn $75,000 or more in its first year of operation, you should
register for GST.
GST turnover is your business's gross income, not your business's profit.
For example, if you run an online clothing store and you sell $80,000
worth of clothes, you'd have to register for GST because your GST
turnover is over the $75,000 threshold. This rule still applies, even if
you only get to keep $40,000.
If your business doesn't fit into one of the above categories, you don't
have to register for GST.
Importance of Registering GST

If you haven't registered for GST, and you become aware that your GST
turnover will exceed the $75,000 per year threshold, you will have to
register for GST within 21 days.
If you run a business or other enterprise and have a GST turnover of

$75,000 or more ($150,000 or more for non-profit organisations), or
you provide taxi travel (including ride-sourcing) – you need to:
• register for GST
• work out whether your sales are taxable (that is, subject to GST, and
not exempted because they are GST-free or input-taxed) and include
GST in the price of your taxable sales
• issue tax invoices for your taxable sales and obtain tax invoices for your
business purchases
• claim GST credits for GST included in the price of your business purchases
• account for GST on either a cash or non-cash basis and put aside the
GST you collected so you can pay it to the ATO when due
• lodge activity statements or annual returns to report your sales and

purchases, and pay GST to the ATO or receive a GST refund

It's a good idea to check each month to ensure you're not likely to go
over the limit. Keeping an eye on your GST turnover is important so you
can register if necessary. If your GST turnover is below the $75,000,
registering for GST is optional.
You can register for GST, or cancel your GST registration if your
business changes or ceases:
• online through the ATO Business Portal
• by phone – if you're an authorised contact for the business, phone the

ATO on the business enquiries line
• through your registered tax agent or BAS agent.
You can also lodge a form with the office:
• to register, complete the Add a new business account (NAT 2954) form
• to cancel, complete the Application to cancel registration (NAT 2955) form
You may choose to register if your GST turnover is below the $75,000
threshold, however this means that once registered, regardless of your
turnover, you must include GST in your fees and claim GST credits for
your business purchases.
Registering GST
1. You need an Australian Business Number (ABN) to register for GST. Your
ABN is part of the GST system and your ABN will be used as your GST
registration number. If you don't have an ABN and are registering for
one, you can use the same online form to apply for tax registrations
during the application process. If you anticipate that your GST turnover
will be over $75 000, make sure you register for GST when completing
your ABN application.
2. Visit the ATO Online Business Portal and login with your Administrator
AUSkey. You will be able to complete your tax registrations using the
Business Portal. If you haven't got an AUSkey, you can find out how to
register for AUSkey on the Australian Business Register (ABR) website.
3. If you are unable to register online, you can call the ATO or register for
GST through a registered tax agent.
If you're registered for GST, you're entitled to claim input tax credits for
the GST paid on items you've bought for business use. If you're not
registered, you can't claim input tax credits.
GST credits are a potential amount of money your business might be

able to claim from the ATO. If you are registered for GST, you can claim
back the GST that has been included in the purchase price of something
you've bought for your business.

For example, Laura runs an accountancy firm and has just bought a new
computer for the office. The computer cost Laura $1100, including GST. Because
GST is one-eleventh of the sale price, Laura would have paid $100 in GST.
Laura is registered for GST because her business's GST turnover is more
than $75,000. She is able to claim GST credits for the GST included in
the sale price of her computer ($100). If at the end of the year her GST
credits are higher than the amount of GST she has to pay the ATO, she
will be able to get a refund.
If you’re registered for GST, your invoice must be a tax invoice. Tax
invoices are different to regular invoices as they include the GST amount
for each item along with some extra details. Tax invoices must be
formatted correctly for you to be able to claim you full tax entitlements.
If your GST turnover is under $75,000 and you don't register for GST, you
won't include a GST component in your prices. This means that any invoices
you provide will need to show that GST was not included in the purchase
price. You also can't claim GST credits for your business purchases.
If you're not registered for GST, check each month to see whether you've
reached the threshold, or are likely to exceed it. If your turnover exceeds the
relevant threshold, then you must register within 21 days of reaching it.
You will need an ABN before you can register for GST. You can get your
ABN when you first register your business or at a later time.
The Business registration service Beta helps you register for GST and
other taxes on the same form. Even though it’s a Beta service, the
registrations you apply for are real. The Business registration service is
currently available for:
• New businesses starting as a sole trader, partnership, company, trust,

joint venture or superannuation fund who can apply for tax registrations
with an ABN, business name or company registration.
• Existing businesses with an ABN, who can apply for tax registrations or
an AUSkey login.

GST Concessions for Small Businesses

If your business has an annual turnover of less than $10 million, you
may be able to access the following GST concessions.
• Accounting for GST on a cash basis – You can account for GST in the
same tax period you receive payments from your customers and claim
input tax credits for making payments to your suppliers.
• Paying GST by instalments – You can pay GST by instalments each

quarter based on what you or the Australian Tax Office (ATO) estimates
your GST liability to be. You can vary this amount each quarter.
• Annual apportionment of GST input tax credits – You can claim a

full input tax credit for a business purchase that you intend to use partly
for private purposes and make a single adjustment to account for the
private use percentage at the end of your income year.
Pay As You Go Withholding

When you make payments to employees and some contractors, you need
to withhold an amount and send it to the Australian Taxation Office (ATO)
at regular intervals. The ATO calls this Pay As You Go (PAYG) withholding.
You'll have withholding obligations if any of the following apply:
• you have employees
• you have other workers, such as contractors, and you enter into
voluntary agreements to withhold amounts from your payments to them
• you make payments to businesses that don't quote their Australian

business number (ABN).
If you make payments subject to withholding, you must:
• register for PAYG withholding with the ATO as soon as you know you
need to withhold
• withhold amounts from wages and other payments
• lodge activity statements and pay the withheld amounts to the ATO
• provide payment summaries to all employees and other payees by 14 July
• provide a PAYG withholding payment summary annual report to the ATO

by 14 August.
The Business registration service Beta helps you register for PAYG
withholding and other taxes on the same form. Even though it’s a Beta
service, the registrations you apply for are real.

The Business registration service is currently available for:
• New businesses starting as a sole trader, partnership, company, trust,

joint venture or superannuation fund who can apply for tax registrations
with an ABN, business name or company registration.
• Existing businesses with an ABN, who can apply for tax registrations or
an AUSkey login.
A few things to remember:
• You must register for PAYG withholding before you are first required to
withhold an amount from a payment.
• If you cease to be an employer you should cancel your PAYG withholding

registration.
• Before you enter into a work agreement or contract, you need to check
that the worker is legally allowed to work in Australia.
• PAYG withholding is different to payroll tax. Payroll tax is a state tax.
It’s important you keep the right records.
Payments you need to withhold from

As a payer, you may need to withhold amounts from payments you
make to your workers, other businesses and other payees, and send the
withheld amount to the Australian Taxation Office.
Withholding by employers
Your withholding obligations depend on whether your worker is an

employee or contractor. If your worker is:
• an employee, you generally have to withhold amounts from payments

you make to them
• a contractor, you generally do not withhold amounts from payments you

make to them (unless they request withholding by entering into a
voluntary agreement with you).
To check if your worker is an employee or contractor, you need to

review the whole working arrangement. The easiest way is to use the
decision tool formulated by the Australian Taxation Office.
The most common payments you withhold amounts from are those to:
• your employees
• your directors
• businesses that don't quote their ABN to you
• contractors who have a voluntary agreement with you.

If you operate your business as a sole trader or partnership and you

draw amounts from the business, this is not a wage and you don't have
to withhold from these drawings. You make some provision for your
income tax liability through PAYG instalments.
Paying and reporting withheld amounts
If you have withheld tax amounts from payments you make to your
payees, you need to:
• provide the withheld amounts to the Australian Taxation Office
• report those amounts to the ATO regularly on activity statements
• lodge an annual report confirming your total withholding
• provide payment summaries detailing total payments and withholding to

each of your payees.
Other payments that may need tax withheld

Payments, other than income from employment, may also need tax
withheld, including:
• investment income to someone who does not provide their TFN
• dividends, interest and royalties paid to non-residents of Australia
• payments to certain foreign residents for activities related to gaming,

entertainment and sports, and construction
• payments to Australian residents working overseas
• super income streams and annuities
• payments made to beneficiaries of closely held trusts.
You can register your business for an ABN, GST, PAYG, a business name
and an AUSkey to access the Business Portal, all at the same time on
the Australian Business Register.
If you need to withhold tax but don't need an ABN, you can still register
for a PAYG withholding account.
How to Register or Cancel PAYG Withholding

If you have an ABN
If your business has an active ABN, you can register or cancel your
PAYG withholding business account:
• online through ATO’s Business Portal
• using your Standard Business Reporting compatible software
• by phoning ATO’s business line if you're an authorised business contact.

You can also:
• download and complete the Add a new business account (NAT 2954) form
• order the Application to cancel registration (NAT 2955) form.
Use the Australian Taxation Office’s publication ordering service for

business to obtain these forms.
If you don't need an ABN but have to withhold tax
You should register for a PAYG withholding account if you don't need an
ABN but have to withhold tax from a payment. You might have to
withhold tax if:
• you self-manage your National Disability Insurance Scheme funds and

directly employ staff
• a supplier has not quoted their ABN
• you employ, or intend to employ, a person such as a nanny, cleaner,

cook or gardener
• you pay royalties, dividends or interest to non-residents, or withhold

from, or report investment income to Australian residents.
You can register your PAYG withholding account and not have an ABN:
• by phoning ATO’s business line and speaking to a customer service

representative
• completing an Application to register a PAYG withholding account (NAT 3377)
To cancel your PAYG withholding account, you can:
• phone ATO’s business line and speak to a customer service representative
• complete an Application to cancel registration (NAT 2955) form
• ask your registered tax agent or BAS agent.
PAYG Payment Summaries

You have to give each of your payees a payment summary showing how
much you paid them for the financial year and how much you withheld
from the payments.
You may have to complete various types of payment summaries

depending on the types of payments you've made throughout the
financial year.

End of financial year payments to employees

If salary and wages are accrued in the current financial year (prior to 30
June) but paid in the following financial year (on or after 01 July), the full
amount of the payment will be taxed at the following financial year's tax
rates and included in the following financial year's payment summary.
For example, XYZ Company pays their employees each Thursday. The
final payment for the 2015–16 financial year is on 25 June 2016. The
amount that is accrued following this date will be paid to the employees
on 2 July 2016 and be included in the 2016–17 payment summary.
Withholding on the whole amount will be at the rates that apply for the
2016–17 financial year.
Electronic Payments
When payments are made electronically, the payment date is either the
date stipulated in the electronic transaction or, if no date is stipulated, the
date on which the payment is intended to be made into that bank account.
Let’s consider this example. ABC Company instructs their bank to pay their
employees' salary by EFT on 30 June 2008. The company specifies that the
payments should be credited to the employees' bank account on 1 July. As
the payment is instructed to be made on 1 July, these payments must be
included in the 2008–09 payment summary and withholding on the whole
amount will be at the rates that apply for that year.
Types of Payment Summaries

The type of payment summary you give each of your payees will be
determined by the type of payment you made as well as when it was
paid. These types are the following:
Payment summaries for workers
Generally, you must give each of your workers a payment summary by

14 July each year, even if the withheld amount is nil. Some of the most
common payment summaries used for workers are:
• PAYG payment summary - individual non-business (NAT 0046)
• PAYG payment summary – business and personal services income (NAT

72545)
• PAYG payment summary – superannuation lump sum (NAT 70947)
The payment summary should show each payee how much you paid them
in the financial year, and how much you withheld from the payments.
If you have paid an employment termination payment (ETP) to a worker

you must give them a PAYG payment summary - employment termination
payment (NAT 70868) within 14 days of making the payment.

You may have to complete various types of payment summaries

depending on the types of payments you've made throughout the
financial year.
Payment summaries where no ABN was quoted
If you have withheld tax from a payment because another business

didn’t quote an ABN to you, you must give them a payment summary
showing details of the payment.
You can use the ATO’s form PAYG payment summary - withholding where
ABN is not quoted or you can prepare your own, as long as you include all
the necessary details. You need to provide this payment summary at the
time you make the payment or as soon as practicable afterwards.
Electronic payment summaries
If you lodge your PAYG withholding reports online you can give your
workers their payment summaries electronically. They must be:
• non-editable
• able to be printed in high quality so they are easy to read.
You will need to:
• give your payees the option to receive either an electronic or paper

payment summary
• tell your payees when the payment summaries are available and ensure
they know how to access and print them
• ensure the method you choose to distribute electronic payment

summaries is secure enough to protect their tax file numbers and other
personal information.
You can provide the following payment summaries electronically:
• PAYG payment summary - individual non-business (NAT 0046)
• PAYG payment summary - foreign employment (NAT 73297)
• PAYG payment summary - business and personal services income (NAT

72545)
• PAYG payment summary - employment termination payment (NAT

70868)
• PAYG payment summary - superannuation lump sum (NAT 70947)
• PAYG payment summary - superannuation income stream (NAT 70987)
• PAYG payment summary - where ABN not quoted (NAT 3283).

You can also print the individual payment summaries and provide them
to your employees. However, do not send printed copies of your
employee's electronic payment summaries to the ATO. The systems of
the Australian Taxation Office cannot process payment summaries
printed in this format.
You can find out more about the requirements for producing self-print
and electronic payment summaries, by accessing their software
developers site.
Part-year payment summaries
A worker can request a part-year payment summary. It must be in writing

and made before 9 June (21 days before the end of the financial year).
You must provide your worker with a copy of their payment summary
within 14 days of their request unless the worker has received a
reportable fringe benefits tax (which can only be calculated at the end of
the fringe benefits tax year).
Part-year payment summaries provide details of withholding payments

made from either:
• 1 July of that financial year to the date of issue of the payment summary
• The date of issue of any previous part-year payment summary to the

date of issue of the current one.
If you have provided a worker with a part-year payment summary, their

end of financial year payment summary should only include details for
the period from the date of issue of the last part-year payment
summary to 30 June.
Paper payment summaries
You can order paper payment summaries from the Australian Taxation
Office using their online publication ordering service for business. These are
triplicate forms - you give one copy to each worker, keep a copy for your
records and send the original to the ATO as part of your annual reporting.
Fringe Benefits Tax

If you're an employer and you provide fringe benefits to your
employees, you may have to pay fringe benefits tax (FBT).
Some common fringe benefits are:
• private use of a work car by an employee or director
• paying private expenses for an employee or director, such as school fees

or health insurance costs.

We recommend you register for FBT as soon as you've decided you'll

provide benefits.
How to register or cancel FBT

Fringe benefits are an important part of business and can be a useful
way of attracting quality staff. However, if you're going to provide fringe
benefits to your staff, you need to be aware of your taxation obligations.
Fringe Benefits Tax (FBT) is a tax payable by employers for benefits paid
to an employee (or an employee's associate e.g. a family member) in
place of salary or wages. This is separate to income tax and is calculated
on the taxable value of the fringe benefits provided.
You need to register for FBT once you have determined that you are
providing fringe benefits and have to pay FBT. You can register for FBT,
or cancel your FBT registration:
• through your registered tax agent
• by phone – if you're an authorised contact for the business, phone us on

the business enquiries line
• by lodging a form:
− to register, complete the Application to register for fringe benefits tax

(NAT 1055) form
− to cancel, advise in your annual fringe benefits tax return or notice of
non-lodgment
You must register for FBT and lodge an FBT return if you have a liability
during an FBT year (1 April to 31 March).
If you are registered for FBT but don’t need to lodge an FBT return for
the year, complete a Fringe benefits tax – notice of non-lodgment.
To secure the best workers for your business, you often have to entice
them with non-income related benefits. For example, an employee may
receive fringe benefits in the form of:
• a car
• car parking
• low interest loans
• payment of private expenses.
It's entirely legal and a common form of reimbursement used by

businesses for their employees.

If your business provides fringe benefits to your employees then you

need to:
• calculate how much FBT you have to pay
• register for FBT
• keep the necessary FBT records
• report fringe benefits on your employees' payment summaries
• lodge a return and pay FBT to the ATO
• understand which benefits are exempt from FBT.
Fuel Tax Credits

Fuel tax credits can be claimed by businesses for the fuel tax (excise or
customs duty) included in the price of fuel used in most of their business
activities. Fuel tax credits can be claimed for any taxable fuel that you
purchase, manufacture or import, as long as you use it in your business.
Taxable fuels can include liquid fuels, including fuel blends and gaseous fuels.
You can claim credits for the fuel tax (excise or customs duty) included
in the price of fuel you use in your business activities. Some fuels and
activities are not eligible for fuel tax credits, including:
• fuel used in light vehicles of 4.5 tonne gross vehicle mass (GVM) or less
travelling on public roads
• aviation fuels
• alternative fuels (fuel tax credits may be available for some activities
where alternative fuel is used.)
Fuel tax credits provide you with a credit for the fuel tax included in the
price of fuel you use for your business activities. You're able to claim tax
fuel credits for business activities in:
• machinery
• plant
• equipment
• heavy vehicles
Your business needs to be eligible to make a claim. This means you

must be registered for Goods & Services Tax (GST) and fuel tax credits
before you can make a claim.
You claim fuel tax credits on your business activity statement (BAS).
Fuel tax credits are also business income and need to be in your tax
return at 'Assessable Government industry payments.'

Heavy vehicles on public roads
The ATO has created a list of heavy vehicles considered to be used off
public roads (for example, a tractor or backhoe). This list can be
accessible on the Heavy vehicles page found on the ATO website.
From the March 2016 BAS onwards, if your vehicle type is on this list,
you can claim all fuel used for the vehicle at the 'all other business uses'
rate, even if you sometimes drive the vehicle on a public road.
The amount of fuel tax credits you can claim depends on the type of fuel
you use and what business activity you use it in. When determining your
eligibility and making a claim, consider:
• when you acquired the fuel
• the type of fuel you use
• the business activity you're using the fuel for.
How to register for fuel tax credits
To register for fuel tax credits you'll also need to register for GST. You can
register for fuel tax credits online through a Business Portal message:
• go to your Inbox, select New Message, then Registrations
• select WET, fuel tax credits, LCT registration and add a message
including the following:
− type of registration you are applying for - 'Fuel tax credits'

− the date you want registration to take effect, noting that this date
cannot be before the date of your GST registration or 1 July 2006
(when fuel tax credits commenced)
− the type of fuel used in your business activities – diesel, petrol or
other (if other, please specify)
− whether the fuel is used in a vehicle with GVM greater than 4.5
tonnes travelling on a public road.
− your financial institution account details (if you haven't already
provided them to us)
You can also register for fuel tax credits:
• by phone
− use ATO’s automated self-help service (available 24 hours a day,

seven days a week)
− speak with a service representative on our business enquiries line.
• by lodging the Add a new business account (NAT 2954) form – you can
order this form using our online publication ordering service for business

You can cancel your registration for fuel tax credits:
• online through a Business Portal message
− go to your Inbox, select New Message, and then Registrations

− select Cancellation and add a message including 'fuel tax credits' and
the date you want your registration to be cancelled.

ATO’s business enquiries line
• by lodging the Application to cancel registration (NAT 2955) form, which you
can order using the ATO’s online publication ordering service for business.
Fuel Tax Credit Rate

The fuel tax credit rate is adjusted every year in February and August in
line with the consumer price index, so you should check the rates each
time you do your Business activity statement (BAS). It's possible to
have more than one rate in a BAS period.
If you claim less than $10,000 in fuel tax credits each year, there is a
different way to calculate your rates. From the March 2016 BAS
onwards, if you claim less than $10,000 in fuel tax credits each year,
you can use these simplified methods to calculate your fuel tax credits:
• When fuel tax credit rates change in a BAS period, you can now simply
use the rate that applies at the end of that BAS period.
• To work out the total litres of fuel for your claim, you can use the total
cost of the fuel you purchased in the BAS period, and divide it by the
average price of the fuel for that period.
You can also use a range of documents other than your fuel receipts (such
as a bank statement) to support your fuel tax credit claims for all your past
and future BAS. Details on claims of less than $10,000 and more
information on fuel tax credit rates are available on the ATO website.

Calculating Fuel Tax Credits

• To see if your business is eligible to claim for fuel tax credits, try the ATO
Fuel tax credit eligibility tool.
• Get your claim right - use the ATO Fuel tax credit calculator to work out
your fuel tax credits.
• If you're a small business owner, download the ATO app to calculate the
fuel tax credit entitlements you can claim on your business activity
statement. You can also download or update the ATO app from Google
Play, the Windows Phone Store, or the Apple App Store.
• Be sure to check the rates online before completing your BAS.
• View some past webinars on fuel tax credits - the webinars will provide
you with information about the fuel tax credit rates changes from 1 July
2014, give you tips to avoid common errors and let you know the types
of tools and support on offer to help you with your claims.
• If you're still unsure, get in touch with the ATO on 13 28 66.
Claiming Fuel Tax Credits

To claim fuel tax credits, make sure:
• Your business is eligible. This includes being registered for Goods &
Services Tax (GST). Use the Australian Taxation Office's (ATO) Fuel tax
credit eligibility tool to find out if you're eligible.
• You get your claim right. You can use the ATO Fuel tax credit
calculator or the ATO app to work out your fuel tax credits.
• You claim on your BAS. You claim fuel tax credits on your BAS in the
same way as you claim GST credits.
• You claim within the time limits. Generally, you must claim your
credits within four years. The four years commences from the day after
you were required to lodge the BAS for the tax period in which the fuel
was acquired.
Wine Equalisation Tax

If you make wine, import wine into Australia or sell it by wholesale,
you'll generally have to account for wine equalisation tax (WET). It's a
once-off tax on the value of the wine and applies when you sell or deal
with wine:
• through wholesale sales
• through some retail sales (for example, cellar door sales and retail sales
of repackaged bulk wine)
• for own use where WET has not already been paid
• by importing into Australia

WET is a tax of 29% of the wholesale value of wine. It is generally only

payable if you are registered or required to be registered for GST.
It's designed to be paid on the last wholesale sale of wine, which is

usually between the wholesaler and retailer. But it may apply in other
circumstances – such as cellar door sales or tastings – where there
hasn't been a wholesale sale. WET is also payable on imports of wine
(whether or not you are registered for GST).
Transactions are exempt from WET when:
• the transaction happens 'under quote' (the buyer quotes their ABN to the
seller in the approved form)
− this typically happens when there is an earlier wholesale transaction,

such as between a producer and distributor, before the wine reaches
the retailer
• the wine is GST-free – for example, it's being exported and WET has not
already been paid on the wine.
The test for whether producers are associated for the purposes of the
rebate cap is applied at any time during the financial year, and not at
the end of the financial year. This applies from 1 October 2017.
Additional changes to the producer rebate are:
• the rebate cap for each financial year being reduced from $500,000 to
$350,000 from 1 July 2018
• tightened eligibility criteria applying to 2018 vintage and later wine sold
or dealt with from 1 January 2018, and most other wine sold or dealt
with from 1 July 2018.
There are reduced circumstances where you can claim a WET credit for:
• 2018 and later vintage wine sold or dealt with from 1 January 2018
• 2017 and earlier vintage wine sold or dealt with from 1 July 2018.
There are changes to the information you must include when buying
wine under quote for:
• 2018 and later vintage wine sold or dealt with from 1 January 2018
• 2017 and earlier vintage wine sold or dealt with from 1 July 2018.
Reporting and paying GST instalments

If you report and pay GST using Option 3: Pay GST instalment amount
and report annually, don't complete the WET section of your BAS. Your
WET will be included in your GST instalment amount.

However, you'll still need to report WET payable (1C) and WET
refundable (1D) when lodging your Annual GST Return. This is due at
the same time as your income tax return.
If you report and pay GST annually you are not required to report WET
on a monthly or quarterly BAS, however you must report WET on your
Annual GST Return.
How to register for WET
You can register for WET online through a Business Portal message:
• go to your Inbox, select 'New Message', then 'Registrations'
• select 'WET, fuel tax credit, LCT registration' and add a message
− type of registration you are applying for – 'wine equalisation tax'

− the date you want registration to take effect
− the date you did, or will, become involved in manufacturing,
wholesaling, importing or exporting alcoholic beverages
− the percentage of your total turnover each of these represent - wine,
beer, spirits, and other alcoholic beverages
− a description of your activity in the alcoholic beverages industry (for
example, manufacturer, wholesaler, importer, exporter, indirect
marketer, retailer)
You can also register for WET:

ATO business enquiries line
• by lodging the Add a new business account (NAT 2954) form, which you
can order using our online publication ordering service for business
How to cancel your registration for WET
You can cancel your registration for WET:
− go to your Inbox, select 'New Message', then 'Registrations'

− select 'Cancellation' and add a message including 'wine equalisation
tax' and the date you want your registration to be cancelled
• by phone – if you're an authorised contact for the business, phone our

business enquiries line
• by lodging the Application to cancel registration (NAT 2955) form, which

you can order using our online publication ordering service for business

Luxury Car Tax

Luxury car tax (LCT) is a tax on cars with a GST-inclusive value above the
LCT threshold. LCT is imposed at the rate of 33% on the amount above
the luxury car threshold. This tax only applies to the portion of the car’s
value that is above the threshold, not the total value of the car. The
value generally also includes the value of any accessories, parts or
attachments supplied, or imported, at the same time as the car.
LCT is paid by businesses that sell or import luxury cars (dealers), and
also by individuals who import luxury cars. The LCT threshold is reviewed
each financial year and may change. Retailers, wholesalers and
manufacturers of luxury cars may have a liability for LCT. Importers
(including private buyers) also pay LCT.
Paying LCT
Generally, you're required to pay LCT if you're registered or required to

be registered for GST and you sell or import a luxury car – this includes
retailers, wholesalers, manufacturers and other businesses that sell
luxury cars. You also have to pay LCT if you're an individual (private
buyer) who imports a luxury car.
LCT applies to sales of cars that are two years old or less. A car is more
than two years old at the time of supply if it was manufactured locally or
imported more than two years previously.
For LCT purposes, a car is a motor vehicle (but not a motorcycle)

designed to carry a load of less than two tonnes and fewer than nine
passengers. A limousine is classified as a car, regardless of the number
of passengers it's designed to carry.
LCT applies to a car purchased by a person with a disability even if the

car is GST-free. However, disability-related modifications are not subject
to LCT.
LCT is also payable if you’re an endorsed public institution and you

purchase a luxury car locally. An endorsed public institution refers to a
museum, gallery or library that is registered for GST and endorsed as a
deductible gift recipient. However, if the luxury car is a work of art or a
collectors piece and is purchased for the sole purpose of public display,
you don't need to pay LCT and can claim a refund at label 1F on your
BAS for the LCT paid for the luxury car.

LCT doesn’t apply:
• where the recipient has quoted an ABN in the approved format
• where the car was manufactured in Australia more than two years before
the sale
• where the car was imported more than two years before the sale
• to a car exported as a GST-free export
• to a car that is (or is intended to be) registered for use as an emergency

vehicle such as an ambulance, firefighting vehicle, police vehicle, or
search and rescue vehicle
• to a motor home or campervan, or a commercial vehicle designed mainly

for carrying goods and not passengers
• to modifications for people with a disability
• to the LCT value that LCT has already been paid on
• when an endorsed public institution (museum, gallery or library that is

registered for GST and endorsed as a deductible gift recipient) either
− imports a car that is a work of art or collectors piece for the sole
purpose of public display
− sells a car that was purchased as a work of art or collectors piece for
the sole purpose of public display to another endorsed public
institution that also intends to use that car solely for public display.
Certification for emergency vehicles
If you supply an emergency vehicle, you must get a statement, in the

format shown below, from the purchaser certifying that the vehicle will
only be used as an emergency vehicle.

How to register for LCT
Your business must be registered for GST before you can register for
LCT. You can register for LCT online through a Business Portal message:
• go to your Inbox, select 'New Message', then 'Registrations'
• select 'WET, fuel tax credit, LCT registration' and add a message
− type of registration you are applying for – 'luxury car tax'

− the date you want registration to take effect
− the date you did, or will, become involved in manufacturing,
wholesaling, importing or retailing luxury cars
− a description of your activity in the luxury car industry (for example,
manufacturer, wholesaler, importer, retailer)
− the percentage of your total activity each of these represent -
manufacturer, wholesaler, importer and retailer
− the estimated annual luxury car tax liability ($0 – $49,999, $50,000
– $99,999, $100,000 – $499,999, $500,000 – $5 million, more than
$5 million)
− whether you expect to have a LCT liability on every activity statement.
You can also register for LCT:

• by lodging the Add a new business account (NAT 2954) form, which you
can order using our online publication ordering service for business
How to cancel your LCT registration
You can cancel your registration for LCT:
− go to your Inbox, select 'New Message', then 'Registrations'

− select 'Cancellation' and add a message including 'luxury car tax' and
the date you want your registration to be cancelled

• by lodging the Application to cancel registration (NAT 2955) form, which

you can order using our online publication ordering service for business

Reporting and paying GST instalments

If you report and pay GST using Option 3: Pay GST instalment amount
and report annually, don't complete the LCT section of your BAS. Your
LCT will be included in your GST instalment amount.
However, you will still need to report LCT payable (1E) and LCT
refundable (1F) when lodging your Annual GST Return. This is due at
the same time as your income tax return.
Reporting and paying GST annually

If you report and pay GST annually you don't have to report LCT on a
monthly or quarterly BAS. You'll only need to report LCT on your Annual
GST Return.

Section 2 Business Structures: Sole Trader

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Section 2 Business Structures: Sole Trader

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Australian Accounting and Bookkeeping

Section 2 Business Structures

As a sole trader, you:

Learning Guide V1.0 © AAMC Training Group 3

• Gives you full control of your assets and business decisions.

• Requires fewer reporting requirements and is generally a low-cost structure.

• Any losses incurred by your business activities may be offset against

• Doesn't require a separate business bank account, unlike a company

• As the business owner, you're not considered an 'employee' of the

• If you're a business owner without employees, there's no obligation to

• It's relatively easy to change your business structure if the business

Before deciding on your business structure, it is important to seek

Personal Services Income (PSI)

Learning Guide V1.0 © AAMC Training Group 4

A company is run by its directors and owned by its shareholders. While a

You need to register a company with the Australian Securities and

• has limited liability compared to other structures

• is a more complex business structure to start and run

• is entitled to an ABN if it is registered under the Corporations Act 2001. A

• must be registered for GST if its annual GST turnover is $75,000 or

• must lodge an annual company tax return

• requires an annual company tax return to be lodged with the ATO

Learning Guide V1.0 © AAMC Training Group 5

Personal services income (PSI)

A written partnership agreement is not essential for a partnership to

A partnership agreement can help prevent misunderstandings and

Learning Guide V1.0 © AAMC Training Group 6

• If you are carrying on an enterprise, you can apply for an Australian

Personal services income (PSI)

Setting up a trust can be expensive as a formal deed is required

Learning Guide V1.0 © AAMC Training Group 7

• require the trustee to undertake formal yearly administrative tasks.

• if you operate your business as a trust, the trustee is legally responsible

• must be registered for GST if annual GST turnover is $75,000 or more

• may be able to access small business tax concessions

Who pays income tax?

• if all or part of the net trust income is distributed to non-residents or

Personal services income

Learning Guide V1.0 © AAMC Training Group 8

Self-Managed Superannuation Funds (SMSF)

As a trustee of a regulated superannuation fund, you must comply with the

• The member’s retirement

• The member reaching an age not less than prescribed in regulations

• Termination of a member’s employment with an employer who made

• On the cessation of work due to ill health

• Death of a member after reaching an age not less than prescribed in

• Another ancillary purpose approved in writing by the regulator

This allows an SMSF to provide benefits in situations of financial hardship

Learning Guide V1.0 © AAMC Training Group 9

• Superannuation guarantee (SG) contributions

• Contributions made by employers over and above the SG or award

• Payments by the ATO of SG shortfall amounts

• Contributions paid pursuant to an award/agreement certified by an

• Personal contributions for which a tax deduction is claimed

Non Concessional Contributions (NCCs) are contributions that are not

• Personal post tax contributions

• Certain amounts of an overseas transfer

• Excess concessional contributions above the concessional contribution

• Sole purpose test

• Trustee covenants concerning investment of member’s money

• Regulations applying to investments in collectibles and personal use assets

• General prohibition on giving a security over fund assets

• Prohibition on loans to members