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Accounting and Tax Reparation

Company Taxation and Tax Rate 2013-2014

Australian Taxation Office has laid out exemplary system for the whole world. The tax policies regarding individuals, families and companies have been explained clearly by ATO on their website. If you still are unable to understand any concept, just feel free to contact them and they will provide you with the detailed guidance. Our team will be helping you today as well in gaining better understanding of Company Taxation and how small business accountants can help you.

Learning Basics of Company Taxation in Australia

Just like an individual has to pay tax on income, a company is also liable to make tax payments at specific rates mentioned by ATO at beginning of every financial year.

For the year 2013/2014, the tax rate is 30% flat for all companies.

There is no application of progressive method in company taxation unlike personal income tax. A company pays fixed amount of tax on its profitability. Here is a fact which you might find unpleasing, the tax has to be paid by a company on its corporate income before the organization can distribute dividends among its shareholders. It has to be done at the corporate level of the organization. At the same time, shareholders are provided with “Franking Credit” also known as credit tax in your tax return. It shows the shareholders that tax has been paid from their dividends. The whole procedure is called Dividend Imputation in financial terms.

When Dividend Imputation takes place in a corporation, franking credit could be generated with application of maximum $30 per $100 on dividend. ATO encourages the shareholders of corporation to use the particular credits for diminishing individual tax income for the future which includes any claim for refund of over credits remaining even after the offsetting of income tax to be paid. To sum up the whole thing, any Australian resident’s corporation in Australia has to pay company or corporate tax charged at fixed rate set by ATO. There are no differences on tax rates applied to Australian resident or non resident’s company. The change may only occur in terms of industry and business sector.

Discussing Company Tax Rates for 2013/2014

  • Public limited trusts for trading, limited partnerships, corporate trust’s trustees and corporate bodies strata are applied a direct rate of 30%
  • Life insurance companies are covered as following; 30% on taxable income of ordinary class, 15% on taxable income of first home saver account known as FHSA and complying super, 31.5% if insurance company provides retirement savings account due to which zero TFN contributions occur.
  • For other providers of RSA; 15% on taxable income from retirement savings accounts, 31.5% for zero TFN contributing revenue/income and 15% taxable income’s any FHSA portion.
  • Authorised deposit receiving companies other than RSA; 15% on taxable income’s FHSA portion.
  • FHSA trust’s trustees are liable to pay 15% tax on income.
  • PDF also known as Pooled Development Fund is applicable to pay tax even if it commences during a financial year; 25% on component which is unregulated investment, 15% on medium and small company’s component which generates income and 30% on others.

Taxation on Credit Unions 2013/2014

Credit unions have their own taxation liability such as; 30% on credit unions under $50,000, 45% on between $50,000 – $149,999 and 30% on $150,000 or plus. The credit unions have been given different category titles according to their income generation.

Mutual interest’s treatment should be noticed as small credit unions are always liable to pay tax on entire taxable income. On the other hand, no tax liability remains to the amount generated as interest. It is illegal to run a union which is not approved by the authorities in Australia. One must fulfil all the requirements before setting up the credit union. What type of interest is made by credit unions? The outside member pay extra amount for the availed loan from the union. It is quite similar to taking loan from bank. As mentioned above small, medium and large credit unions are charged tax at a different rate as set by ATO for the year of 2013/2014. In case 23G for 1936 ITAA does not apply to credit union’s taxable income then it would be its national taxation income. It happens the same if 9 Division’s Part 3 for ITAA 1936 is not applicable.

Non Profitable Companies 2013/2014

In Australia, the companies having $417 – $915 taxable income are liable to pay tax over $416. On the other hand, if the income is greater than $915 then it is taxed on all of its taxable income generated.

  • 0% if income is below $416
  • 55% if income is between $417 to $915
  • 30% if income is above $916

This is how taxation is being processed in Australia for companies. Every business sector has slightly different rates as discussed above. If you still have any queries, please contact immediately the Australian Taxation Office.

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