How Much Tax Does a Small Business Pay in Australia?

The financial year 2023/2024 will end on 30 June 2024. If you prepare your clients' tax returns, find out below how much tax a small business pays in Australia to guide them accordingly. 

Read Next: Three Tips to Help You Survive the Busy Tax Season

Key business taxes in Australia for the financial year 2023/2024

The key business taxes for small businesses in Australia are: 

1. Company (income) tax 

1. Capital gains tax (CGT) 

1. Goods and services tax (GST) 

2. Payroll tax

How Much Tax Does a Small Business Pay in Australia? 

The full company tax rate in Australia for the income year 2023/2024 is 30%. Meanwhile, the lower company tax rate is 25%. 

For the goods and services tax (GST), a 10% flat rate applies for all businesses earning $75,000 or more annually. The payroll tax rate, on the other hand, depends on the region where the business operates and the total wages they pay each month. If the total wages do not exceed a certain threshold, there’s no need to lodge a return. 

The total amount of tax your client may have to pay depends on several factors:  

• types of taxes that apply to the business,  
• gross and passive income,  
• available tax concessions, and  
• other factors that may be unique to the business or state.

Below is a detailed guide on the tax rates in Australia.

1. Company Tax 

All small businesses registered as a company must pay company tax (also called income tax). This includes resident and non-resident companies, corporate unit trusts, and public trading trusts.

Company tax rates have two types: the full company tax rate and the lower company tax rate. 

• The full company tax rate is 30%. This applies to companies that are not eligible for the lower company tax rate. 
• The lower company tax rate, which applies to base rate entities, is 25%. A business is a base rate entity if:
  • Its aggregated turnover or assessable income for the entire income year is less than the aggregated turnover threshold. In 2024, the current threshold is $50 million. 
  • Its passive income is less than 80% of the assessable income. Passive income includes: 
    • royalties and rent,  
    • interest income,  
    • gains on qualifying securities,  
    • net capital gain,  
    • corporate distributions and its franking credits, and  
    • any assessable income from a partnership or trust. 

To help your client reduce their tax dues legally, you may check out the available concessions and offsets. 

2. Capital Gains Tax

Profits from selling assets are usually subject to the Capital Gains Tax (CGT). It falls under the company’s assessable income. Meaning, it’s not a separate tax. 

Note that a business only needs to pay CGT in net capital gains.

If it incurs a capital loss — which happens when a business sells an asset for less than its original amount — you can offset it against any capital gains in the same or future income years. This way, you can reduce your client’s tax. 

To calculate the capital gains tax, check out this tool or follow this guide. 

You may also check out these small business CGT concessions. 
 

3. Goods and Services Tax

Goods and Services Tax (GST) is a 10% tax added on consumer goods and services in Australia.

A business should register with GST if it falls to any of the following: 

• A business with more than $75,000 GST turnover 
• A non-profit organisation with more than $150,000 GST turnover 
• An existing business that has reached the GST threshold  
• A new business with a projected turnover that will reach the GST threshold in its first year of operation 
• A business that provides taxi, limousine, or ride-sourcing services 
• A business that plans to claim fuel tax credits 

If your client belongs to any of these, you can check if they can claim GST credits. 

4. Payroll Tax

A business should lodge a payroll tax if the total wages it pays to employees exceeds the threshold per state or territory. 

Each state or territory follows a certain threshold and tax rate when computing the payroll tax. See the list below to figure out if your business is liable or exempted from payroll tax. 

Read next: The Basics Of Paying Payroll Tax 

a. Australian Capital Territory (ACT)

• Annual threshold: $2,000,000 
• Monthly threshold: $166,666.66 
• Tax rate: 6.85% 

b. Northern Territory (NT)

• Annual threshold: $1,500,000 
• Monthly threshold: $125,000 
• Weekly threshold: $28,846 
• Tax rate: 5.5% 

c. New South Wales (NSW)

• Annual threshold: $1.2 million 
• Monthly threshold if there are: 
  • 29 days in a month: $95,082 
  • 30 days in a month: $98,361 
  • 31 days in a month: $101,639 

• Tax rate: 5.45% 

d. Victoria

• Annual threshold: $700,000 
• Monthly threshold: $58,333 
• Tax rate: 4.85% 
• Tax rate for regional Victorian employers: 1.2125% 

On top of the regular rates, note that two surcharge types may also apply — 1) the mental health and wellbeing surcharge and 2) the temporary payroll tax surcharge. 

You need to lodge for both surcharges if your client exceeds the first annual threshold of $10 million (the first monthly threshold is $833,333). 

The surcharge rates for both cases are as follows: 

• Businesses with national payrolls of more than $10 million: 0.5% 
• Businesses with national payrolls of more than $100 million: 0.5% + 0.5% 

e. Queensland

• Annual threshold: $1,300,000 
• Monthly threshold: $108,333 
• Weekly threshold: $25,000 
• Tax rates: 

• • Employers who pay less than $6.5 million in Australian taxable wages: 4.75% 
  • Employers who pay more than $6.5 million in Australian taxable wages: 4.95% 

Regional employers can avail themselves of a 1% discount on tax rate until 30 June 2030. 

A mental health levy may also apply to your client. Its tax rates are: 

• Employers who pay more than $10 million in Australian taxable wages: 0.25% 
• Employers who pay more than $100 million in Australian taxable wages: 0.25% + 0.5% 

f. South Australia

• Annual threshold: $1,500,000 
• Monthly threshold: $125,000 
• Weekly threshold: $28,846 
• Tax rates: 

• • Businesses that pay $1.5 to $1.7 million in Australian taxable wages: Variable between 0% to 4.95% 
  • Businesses that pay more than $1.7 million in Australian taxable wages: 4.95% 

• Maximum deduction 

• • Annual: $600,000 
  • Monthly: $50,000 

g. Tasmania

Tax rates and thresholds: 

• 4% for businesses that pay more than $1.25 million to 2 million in Australian taxable wages 
• 6.1% for businesses that pay more than 2 million in Australian taxable wages 

h. Western Australia

Tax rates and thresholds: 

• 5.5% for businesses that pay more than $1 million but less than $7.5 million in Australian taxable wages  
• 5.5% for businesses that pay more than $7.5 million but less than $100 million in Australian taxable wages 

Reducing the taxable income

Claiming your tax-deductible expenses and applying for tax concessions are the top ways to reduce your taxable income. 

Tax concessions vary depending on the type of tax you’re paying. Before you lodge your tax return, make sure you’ve checked with your local tax office first to see if they are offering tax relief programs for the financial year 2023/2024. 

Expand your firm’s capacity for the busy season

Tax preparation requires a massive amount of time, energy, and patience. During the busy season, it may stretch your firm’s capacity too thin to meet all your clients’ tax obligations. 

Outsourcing certain tax functions to professional tax accountants is a smart way to handle such situations without compromising the quality of your service delivery. Good thing, D&V Philippines offers scalable finance and accounting solutions that will serve as the extension of your firm when you need it most. 

To learn more about our services, connect with our tax accountants today! You can also download our whitepaper, Finding the Right Talents: D&V Philippines’ Solutions to Modern Accounting Firms, to know how we can help expand your firm’s capacity.

This article was first published on 7 January 2021 and has been updated yearly to include annual changes in tax rates, concessions, and surcharges.

Last edit: 20 March 2024 

Edited by: Mary Milorrie Campos