There are practically two feasible options which can actualize your dream of establishing your business into a reality in Australia.
The first one is sole trader and the second one is the company. Both the options can take your business to new heights by providing your business a physical setup.
However, no matter which of these options you opt for, you need to lodge a tax return for each. So, your first step would be to decide whether you will become a company proprietor or a sole trader.
Difference between sole trader and company!
There is a particular pattern of operation which both a sole trader or company must adhere to. While a company is a distinct commercial entity altogether a sole trader needs to run the business alone. A company primarily runs the business with its pertinent Australian Business Number, Tax File Number and ACN. On the other end, a sole trader operates a business solely in its own personal name. So, first of all, you need to attain a clear understanding about a sole trader and company.
Company vs. Sole Trader
Here is a brief introduction to both a sole trader and company and how they are different from each other in Australia.
- Company: If you wish to establish a company in Australia, a good deal of money will be required. Once you set up your company, you need to get your organization registered with the Australian Securities and Investments Commission (ASIC). The good part is you can obtain the Australian Business Number (ABN) completely for free. Your ABN will aid you in the process of lodging your Company tax Return in an effective manner. However, you will require the same sum to get the name of your business registered. Each company must possess a substantial bank account for paying the banking fees effortlessly.
- Sole Trader: A sole trader is basically a self-employed being as per the business lingo of Australia. This person is the owner as well as the operator of the business. Professionals like plumbers, gardeners and electricians etc. are chiefly regarded as sole traders in Australia. Some freelance consultants are considered as sole traders in Australia too. It is undoubtedly the most cost-effective way to set up a business and perhaps the fastest as well. Moreover, running your business as a sole trader is as simple as that. The only factor to consider is that both the owner and the business are regarded as a single entity.
Remember, when registering your company with ASIC, the preliminary cost differs between AU$417 and AU$506.
Tax Return Lodgement for Companies and Sole Traders!
A company is levied by taxes in relation to the net income it earns every year. This amount includes the total income exclusive of the operational expenses. The tax rate for companies vary between 27.5% and 30% according to the type of each organization. On the flip side, when it’s a sole trader, taxes are levied on the net income which you earn. Again, a sole trader is entitled to claim certain costs required for operating your personal superannuation contributions and that of your business.
How should companies and sole traders lodge their tax return?
Both a company and sole trader can lodge their company and Sole Trader Tax Return effectively. You can do it alone if you wish by adhering to the right steps as stated by the Australian Taxation Office (ATO). Secondly, you can hire a registered tax agent in Perth to complete the job more efficiently.
Obligations for companies and sole traders!
When it comes to potential obligations, sole traders are more prone to it as companies. Yes, sole traders are legally accountable for each and every single aspect pertaining to their business. On the contrary, companies are incurred by a restrained number of obligations. A company has the right to get sued to sue without any additional risks involved. It can even lend money to expand and grow its business from time to time. A sole trader unfortunately cannot do so and are jeopardized by many risk factors. Some of them include getting bankrupt, losing all the business assets in case they are being sued.
Pay As You Go Instalment Payments!
The Pay As You Go sums should be paid by sole traders to the Australian Taxation Office. If you are a sole trader, the ATO will ask you to pay your PAYG instalment payments on a quarterly basis. By doing so, you can manage your duties way more effortlessly than before.
Hire a Tax Agent in Perth!
So, hopefully, you can now differentiate a company and Sole Trader Income Tax Return quite easily. If you need professional assistance to lodge your company or sole trader tax return, then hire a Tax Agent Perth immediately! A tax agent in Perth has the expertise to lodge your tax return impeccably on your behalf.