Mention the word ‘Tax” to anybody and they instantly think of Income Tax – the annual totalling up of income and deductions and lodging a return. If you’re a business operator, you might have quarterly or monthly GST obligations that also spring to mind.
Regardless of your circumstances, at this point you’re probably thinking that all taxes are annoying and what I’m about to say is moot. You wouldn’t be alone in your thoughts. However, the following taxes, in my view, deserve a special mention. They spring up when you least expect them, they can be costly and come with a hefty compliance burden.
The three annoying taxes that businesses forget are:
#1 Fringe Benefits Tax (FBT)
If you’re a business owner who provides employees with other benefits in addition to salary & wages, then you may have an FBT obligation. Prior to the introduction of FBT in 1986, an employee who received a benefit was taxed on it. However, because many employees failed to declare benefits received in their tax returns, the Federal Government introduced FBT to tax the businesses instead. Making businesses act as tax collectors in this way is one of the Government’s favourite party tricks and they’ve used it a few times since then.
The term ‘benefit’ is a broad one and sometimes a business pays them without even knowing. In some circumstances FBT is unavoidable, but with careful planning its impact can be minimised.
#2 Payroll Tax
This tax is levied at the state level instead of the national level, which is why it doesn’t occur to a lot of people. In Western Australia, if the total payroll of a business exceeds $800,000 per year or $66,667 per month (at time of writing), that business is liable for payroll tax. Generally, people understand they are taxed on what they earn. Most people also understand the concept of GST being a tax on products and services they consume. However, as an advisor, explaining to a business owner that they have to pay more tax as a result of hiring someone is often met with extreme aversion and disgust. And, in my opinion, rightly so.
The payroll tax rules are quite rigid and don’t offer much in the way of relief for smaller businesses. There are some small exceptions, but these are few and far between.
#3 Stamp duty
This tax is also levied at the state level and while it isn’t a regularly occurring tax, many people forget to budget for stamp duty when acquiring dutiable property such as a going concern (a business) or a property and end up forking out more money than they had anticipated. This can stymie the plans of a business for expansion or make a certain project or acquisition less appealing.
There is no avoiding stamp duty on these purchases (unless you’re a first home buyer), which is calculated on the transfer price.
If you require assistance with these or any other tax issues, please contact Optima Partners
Antony Monaldi – Senior Accountant
Optima Partners, March 2015