BuildGrowth Accounting Services - Tax Structures

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There are three commonly used business structures for liability and tax purposes in Australia – a company, a trust and a partnership. When setting up a business, choosing the right structure is an important consideration for asset protection, tax liability and future growth. As your business changes or grows, so too can your business structure.

Build Growth has expert business accountants in Melbourne who can identify and implement the best structure for your small to medium-sized business to enable it to grow faster and save on tax.

Find Out More About Tax Structures

The three types of business structures – company, trust and partnership – each have different tax, reporting and legal obligations as we’ve set out below. If you’d like to discuss these in more detail book an appointment with our business accountant.

Company Structure

A company is a separate legal entity that engages in some kind of business with the aim of making a profit. It can be owned by one person or a group of people, and usually employs a number of staff members. All companies in Australia must be registered with the Australian Securities and Investments Commission (ASIC).

Main tax obligations for companies*:

  • Companies must have their own tax file number (TFN)
  • An annual company tax return must be lodged
  • A tax accountant can either be appointed or, for larger companies, hired to work in-house
  • A company pays income tax instalments using the Pay As You Go (PAYG) system
  • A company pays tax at the company tax rate
  • Small businesses may be eligible for concessional tax rates.

Source: ATO

Trust Structure

Setting up a trust is a bit more complicated and requires an expert business accountant, but it can be a good way to protect your business assets, and is well suited to family-run businesses.

A trustee is appointed who looks after the trust on behalf of its beneficiaries. The trustee is legally responsible for the trust’s operation, including its tax obligations, and a formal deed is drawn up outlining their responsibilities and yearly administrative tasks. Any profit the business makes goes to the trust’s beneficiaries.

Main tax obligations for trusts*:

  • Trusts must have their own tax file number (TFN)
  • A trustee lodges an income tax return on behalf of the trust
  • Beneficiaries may have to pay PAYG instalments depending on their share of the trust
  • Beneficiaries lodge individual tax returns showing their share of the trust’s net income
  • Trusts may be able to claim the small business income tax offset.

Source: ATO

Partnership Structure

Unlike a trust, a partnership is simpler for a business accountant to set up. A partnership consists of a group of two or more people who operate a business and take a share of the income and losses. It can involve friends or family members so a partnership agreement is usually set up by a business accountant outlining what each person is entitled to receive from the income. This also prevents misunderstandings about tax obligations.

Generally in partnerships all the partners are equally liable for the debts of the business, this is called unlimited liability. But some partners may be allowed limited liability for debts based on a percentage of the capital or equity they have in the business. This also needs to be set out in the partnership agreement so everyone is clear.

Main tax obligations for partnerships*:

  • Partnerships must have their own tax file number (TFN)
  • An annual partnership tax return is lodged by an appointed tax accountant
  • Partners lodge individual tax returns showing their share of the partnerships net income
  • Partnerships may be able to claim the small business income tax offset.

Source: ATO

BuildGrowth Business Accountant Melbourne

Need a qualified business accountant with experience in tax structures? BuildGrowth is a full service accountancy firm for small to medium-sized businesses. We offer cloud bookkeeping (using Xero cloud accounting online) and a range of accounting services, including complex business tax structures, cashflow analysis and business forecasting. Contact us to find out how we can help you with business. 

Other Business Accounting Services:

Our business accountants do more than just tax returns. We provide a holistic business accounting service across all aspects of your business. We are certified Xero accountants. We provide certified Xero cloud bookkeeping and also work as an outsourced CFO for businesses who want to grow.

Tax Returns & ATO

Our business accountants can plan and complete your annual company tax return and help you with your ATO reporting obligations. 

Forecasting

Our qualified CPA business accountants will provide valuable business forecasting to help you plan, improve cashflow and grow your business.

Accounts Processing

Our business accountants will manage your accounts, pay your bills and keep your business finances humming, while you keep focussed on what you do best.