Do you want to turn your small business into your dream company? That isn’t as easy as it seems. From lodging necessary tax returns, paying taxes on time to maintain all the financial records, there are plenty of responsibilities to take as an owner. If you cannot comply with your legal tax obligations, your small business may face potential penalties. In this regard, you must know about the different penalties of tax payment and various duties your company should fulfil.
What is a Trust Tax Return?
Trust is one of the structures one can opt for his small business registration in Australia. It is not a separate legal entity, but a mutual relationship occurs between the trustee and other persons. Here, the trustee holds the property or assets for the sake of benefits to other people, termed as ”beneficiaries”. Assets may include shares, property, business or business premises. Trust deeds are detailed specific rules set by the trustee himself regarding the use and management of the assets.
However, for tax-related purposes, a trust is considered a separate entity. The necessary trust tax return has to be lodged on or before the due date. Lodging the return is the trustee’s responsibility, which he can do all by himself or by appointing a registered tax agent. As in a trust, there always remains flexibility in distributing the income; filing tax returns can be highly beneficial. It is always recommended to take help from an experienced and skilled tax return agent because he can get you the maximum tax savings and compliance with all the necessary rules applicable to tax filing and important dates.
What points should you consider while lodging your trust tax return?
The total income is distributed to all the beneficiaries in a trust. Their shares then get taxed at their applicable tax rates. That’s how incoming and tax deductions work in a trust. In some cases, a trustee may be assessed on the entire or a substantial part of the total income, if there is no beneficiary to claim trust income. The trustee may also be assessed on behalf of a beneficiary. The trust that can stream income to beneficiaries in the most tax-effective manner is the family trust. The situation is different for separate individuals, and so one should always consider hiring an experienced tax consultant like Tax Return Perth to get an easy solution for such a complicated task.
What are the penalties that you may have to bear?
According to tax laws set by the Australian Taxation Office or ATO, they can impose administrative penalties on you for conducting any one or all of the following activities:
- If you make a statement that is false and misleading or take such a position behind which, there is no proper reason to argue.
- If you fail to lodge a tax return or statement within adequate time.
- If you fail to withhold the amount required under the ”Pay As You Go” withholding system.
- If you cannot meet other tax obligations.
ATO offers penalty provisions to encourage all the taxpayers to take the taxpaying matter quite seriously to comply with the tax obligations. If you fail to meet the conditions mentioned above due to unavoidable circumstances, the ATO will consider taking essential decisions regarding actions against you. If you’re found liable to pay the penalty, ATO will notify it in written format, including the genuine reason for the penalty, how much you need to give and the due date for payment.
You need not worry about the date as ATO generally informs an individual at least 14 days before the deadline. The penalty amount is calculated using two methods, either by a formula, based on the person’s behaviour and the amount of avoided tax or by multiplying a penalty unit. One thing you should remember is that you cannot claim any deduction for the penalties.
How can you avoid tax return penalties to get a maximum tax refund?
As you’ve become aware of different tax return penalties, you can achieve the maximum tax refund for your business just by following some effective methods.
- Stop wasting tax deduction opportunities of your company: As mentioned earlier, if you fail to meet taxing liabilities, you’ll certainly face penalties, which are non-deductible and thus can pose a great threat to your business’s future. Apart from that, untimely filing of tax returns can also lead to paying potential penalties that can impact your small business. So, at first, you should assess your tax return for your trust and the number of opportunities you can get. To avoid unnecessary issues, you should always try to lodge tax returns and pay property taxes on time, thus acquiring most tax deduction opportunities.
- Submission of tax credentials: According to ATO’s protocol, trustees should not pay PAYG instalments, but beneficiaries should. This will be based on their share of the trust’s instalment income.
- Explanation of every aspect of taxation: ATO generally provides essential information about every possible part of taxation. The crucial pieces of information include rebates, e-tax, superannuation, tax reform, PAYG instalments. You will get an informative legislative database that pertains to each of these topics. Various legal and policy components are included in it. By using this tool, you can effectively infer the applicable taxing laws. Apart from trust, you can find an information portal for every structure of small business on the website of the Australian Taxation office.
On these portals, you can view account statements, prepare and lodge your taxing reports effectively, update various taxing details on the business website and most importantly, pay your taxes within proper time.
In the end
There are different tax obligations for various small business structures in Australia. If you have a company or partnership business, you should look for the concerned obligations on the website of ATO. But whatever may be the structure, as the tax filing is complicated, you should always look for a professional tax agent.