Frequent Asked Questions
1. What is the due date of lodging individual tax return?
The due date for individual taxpayers is 31st October each year. However, with the appointment of a registered tax agent before this day, the due date will be extended to the following year.
2. Do I have to lodge an individual tax return?
It is not necessary if your taxable income is below the tax threshold for the particular financial year.
3. I have not done my individual tax returns for many years, what should I do now?
If you cannot find any documents such as PAYG Payment Summary of previous years, please do not panic. You can appoint a registered tax agent and provide your Tax File Number and then we can obtain your information from the Tax Office.
4. Can I make a change to the tax return which had already been lodged?
Yes, we can lodge an amended tax return by providing your reasons of making the amendment.
5. What common legal structures are available for conducting a business?
- Sole Trader
- Partnership
- Trust
- Company
6. What are the advantages and disadvantages of conducting business as a sole trader?
| Advantages | Disadvantages |
| Control – a sole trader has total control over the business.
Goodwill – the sole trader gets to know his or her customers – goodwill may attach to the sole trader personally. Ease of Sale – the simple structure means the business can be easily sold. Simple – minimal set up costs, few formalities and legal restrictions. Losses – available as a deduction, but subject to non-commercial business loss provisions. Capital Gains Tax – 50% discount if business held longer than 12 months. Small business capital gains tax exemptions available. |
Admission of New Parties – a structure will be required in order to admit a new party into the business.
Finance – the sole trader often finds it difficult to readily access finance without mortgaging personal assets. Liability – the sole trader cannot limit liability; no separate legal entity. Sickness – if the sole trader becomes unwell who does the work? Limited Life – if the sole trader passes away the business usually terminates. Tax Rate – marginal personal tax rates apply. Tax Planning – difficult to split income. |
7. What are the advantages and disadvantages of conducting a business through a partnership?
| Advantages | Disadvantages |
| Admission of New Parties – providing the partnership agreement permits, it is usually possible to admit a new partner to the business.
Disposal Interest – it is possible for a partner to dispose of his/her interest in the partnership without the business ceasing. Control – partners have control over the partnership business. Tax Planning – consider a partnership of family trusts. Losses – are distributed to partners. Capital Gains Tax – 50% discount if business held longer than 12 months. Small business capital gains tax exemptions available. |
Liability – partners are usually joint and severally liable for partnership debts; no separate legal entity.
Tax Rate – marginal personal tax rates apply. Perpetuity – new partnership required for tax on change of partners. |
8. What are the advantages and disadvantages of conducting business through a company?
| Advantages | Disadvantages |
| Finance – finance can be raised through the issue of shares.
Limited Liability – limited liability applies (unless a director issues personal guarantees). Change of ownership – facilitated by the issue of new shares or the sale of existing shares. Research & Development – eligible for R&D concessions. Franking of Dividends – credit for tax paid at the company level given to dividend recipients. Tax Rate – flat company rate applies Employees – PAYG applicable and 100% deduction for superannuation contributions paid. |
Complexity – subject to a raft of regulatory controls and hence costs of establishing and maintaining are higher.
Control – ultimately the shareholders have control over the business. Splitting of Income – limited opportunities; companies can only distribute dividends so that it cannot “stream” capital gains, foreign source income etc to targeted shareholders. Capital Gains – small business exemption lost on distribution i.e. taxed as a dividend. Limited Flexibility – profits can be paid out through salary, dividends or loans. Loans to shareholders are heavily regulated and can give rise to deemed dividends. Losses – cannot be distributed to shareholders, future deductibility subject to complicated restrictions. |
9. Do I need to have the company's accounts audited?
Proprietary companies are exempt from audit unless one of the following applies:
- They are classified as large (Gross operating revenue of $10 million or more; gross asset of $5 million or more; 50 or more employees)
- They are owned by a foreign company
- More than 5% of the shareholders direct the company to be audited
- ASIC requests the company be audited.
10. Briefly explain what a family trust is and how it operates
Family trusts are typically discretionary trusts with family members as the beneficiaries. Discretionary trusts are so called because the trustee has a discretion as to which beneficiaries he or she may pay income or capital. Income can usually be paid to one beneficiary at the exclusion of another. The potential pool of discretionary beneficiaries is usually set out in the trust deed.
11. What expenses can I claim against my rental property income?
Expenses incurred in earning gross rental income, which are allowable deductions, include:
- Construction costs write off (based on original cost of construction)
- Telephone, postage & stationery
- Travel, rent collection and property inspection expenses
- Agent management and letting fees
- Insurance
- Mortgage interest on monies used to acquire rental property
- Depreciation on furnishings, stoves, hot water system etc
- Advertising
- Legal fees relating to rental agreements
- Water and council rates
- Land tax
- Repairs (not initial repairs) and maintenance (includes gardening, lawnmowing etc)
12. Can I offset capital losses against trading income?
Capital gains tax was introduced with effect from 20th September 1985. Capital losses cannot be offset against trading losses. They can only be offset against capital gains or if there are no corresponding capital gains then they can be carried forward indefinitely.
