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7 Common Tax Mistakes Small Businesses Must Avoid This 2022

This year, the tax office says it would focus on resolving a variety of common issues with small-business tax filings, such as ensuring small firms distinguish between private and commercial activity.

Taxation is a headache for all small businesses and self-employed individuals. You want to be out there working and making money. Instead, you’ll need to spend time calculating costs and earnings, filling out BAS forms, and dealing with whatever other paperwork comes your way.

It’s critical to have your tax under control so you can avoid potentially harsh fines and ensure you’re not paying too much tax. Unfortunately, small businesses make a lot of mistakes. Among the notable examples are:

1. Having Incomplete and Missing Tax Invoices 

 

The ATO says that it’s important to have complete and accurate tax invoices to support your deductions. This means ensuring that your tax invoices include all the necessary information, such as the name and ABN of the supplier, a description of the goods or services, the date of the supply, the amount paid or payable, and the GST amount.

2. Failing to Account for Private Use of Business Funds or Assets 

The ATO says you can’t claim a deduction for any private use of business funds or assets. This includes using your business car for private purposes, or claiming a deduction for the interest on a business loan used to purchase a private asset.

3. Failing to Keep Stock Records 

If you’re in the business of selling goods, the ATO says you need to keep accurate stock records. This includes keeping track of the quantity of stock on hand and the cost of purchasing the stock.

4. Failing to Record Sales Through a Cash Register 

If you have a cash register, the ATO says you need to ensure that all sales are being recorded through it. This includes sales of goods and services, as well as any refunds or voids.

5. Not Keeping Track of Changes to Tax Laws 

The ATO says it’s important to keep up to date with any changes to tax laws that might affect your business. This includes changes to GST, fuel tax credits and other taxes that might apply to your business.

6. Not Getting Help From Tax Specialist

The ATO says it’s important to get help from a tax specialist if you’re unsure about something. This could be a registered tax agent, accountant or the ATO itself.

A tax specialist can help you accomplish a bunch of things. They can:

  • help you understand your obligations
  • complete your tax return
  • advise you on how to structure your business
  • help you minimise your tax

7. Not Making the Most of Tax Incentives

There are plenty of tax incentives available to businesses and individuals. You could be missing out on valuable tax deductions or incentives because you don’t know they exist or don’t understand how they work. If you are a small business owner, make sure you understand the small business tax incentives available.

Conclusion

There are a few key tax mistakes commonly made by small businesses. These include failing to file quarterly estimated taxes, not taking advantage of available tax deductions, and not keeping good records. By being aware of these mistakes and taking steps to avoid them, small businesses can save themselves a lot of money and hassle come tax time.

SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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Self-Employment Tax Beginner’s Guide: What You Need to Know

When you are self-employed in Australia, you need to take special care to manage your taxes correctly. There are many opportunities to minimize your tax burden and take advantage of deductions, but you need to plan carefully and know what you are doing. Without professional help, it is easy to miss out on some of the benefits you are entitled to, or to end up with an unexpectedly large tax bill. Interest charges and fines can also be a problem. However, if you take care of your money matters, you can enjoy the benefits of being self-employed. This is easier said than odne as managing your taxes can be rather tricky, especially if you have little to no experience doing this. To help you out, we thought it would be useful to put together a brief article about this subject. If this is something that you’re interested in learning more about, read on for a beginner’s guide to taxes for the self-employed.

Manage Your Cash Flow

Self-employed people usually have a good income, but the money doesn’t come in regularly. To help with this, only buy things that you can afford and have saved up for. It’s also a good idea to have some money saved up in case of an emergency. Since self-employed people don’t get paid holidays or sick leave, they need to save up money so they can still have a life outside of work.

Keep Your Personal and Business Money Separate

Basically, you want to make sure that you are keeping your personal finances separate from your business finances. This means having a separate bank account for your business and only using that account for business expenses. This will help you to keep track of your business expenses and income, and it will also make it easier to see how profitable your business is.

Maximise Your Super

Superannuation is a way of saving money for retirement. The money you contribute is taxed at a lower rate than your income, so it can be a good way to reduce your overall tax bill. If you’re self-employed, you can make your own super contributions and claim a tax deduction for them. You may also be eligible for the government super co-contribution, which is a payment the government makes into your super account if you meet certain criteria.

Conclusion

We hope this guide proves to be useful when it comes to helping you gain a better understanding of how taxes work for the self-employed. While it may seem difficult at first, the information that we’ve laid out above should go a long way into helping you navigate this process. Be sure to keep everything you’ve learned here in mind so that you can make the most informed decisions regarding your finances.

If you’re looking for a tax consultant, then you’ve come to the right place. SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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Why Real Estate Agents Should Have a Secure Trust Account

As part of their job, real estate brokers and salespeople regularly receive money from other people that is meant to be used for a specific purpose. Because they are in a position of trust, they are legally required to handle this money carefully and make sure that it is used as intended. If they don’t, they could lose their license and be held responsible for any resulting financial losses. This is where a trust account comes into play. 

If you’re a real estate agent, you know that one of the most important things you can do for your business is to maintain a secure trust account. This account is where you hold funds that are being held in escrow for your clients. If something were to happen to this account, it could have a major impact on your business. Let’s look at how secure trust accounts work and why having one is important, especially if you’re a real estate agent.

What is a Real Estate Trust Account?

A trust account is a type of bank account that is used to hold funds that are being held in escrow. This account is typically used by real estate agents, lawyers, and other professionals who handle funds on behalf of their clients. The trust account is a secure way to hold these funds, and it helps to protect them from being mishandled or stolen.

One of the benefits of using a trust account is that it is extremely secure. The account is typically held in a bank that is highly reputable and has a good reputation for security. In addition, the account is typically insured against losses. This means that if something were to happen to the account, the insurance company would be responsible for reimbursing the agent for any losses that occurred.

Who Manages Real Estate Trust Funds?

Real estate trust funds are typically managed by a professional who is responsible for keeping the account secure and protecting the money from being lost or stolen. This person is usually a real estate agent, lawyer, or another professional who is familiar with the banking system and how to use trust accounts. In addition, this person may also be responsible for making any necessary payments to the account holder.

Why is a Trust Account Important for Real Estate Agents?

If you’re a real estate agent, it’s important to have a trust account. This account can help to protect you from being sued if something goes wrong with a transaction. It can also help to protect your clients’ money. If you’re handling money on behalf of your clients, it’s important to make sure that that money is kept safe and secure. A trust account can help to do just that.

Another reason that a secure trust account is essential is that it’s typically a very secure form of financial storage. If something were to happen to the account, it would be difficult for someone to access the money. This is because the account is typically held in a bank that has a good reputation for security.

In addition, a secure trust account is typically insured against losses. This means that if something were to happen to the account, the insurance company would be responsible for reimbursing the agent for any losses that occurred.

Conclusion

It’s essential for real estate agents to have a secure trust account. This account protects both the agent and the client from any potential fraud or theft. Keeping the funds in a separate account, it ensures that the agent cannot use the money for personal gain. Additionally, it provides peace of mind for both parties involved in the transaction.

SMB Accounting is becoming one of the leading accounting firms in Australia, offering business advice, taxation, and XERO/MYOB/Quickbooks consulting to clients and individuals. Whenever you need help from reliable business accountants on Sunshine Coast, our team is the one to call. Partner with us today, and let’s start growing your business!

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How Do I Know if I Need to Lodge a Tax Return?

Do you need to file an Australian tax return? This is a question that many people ask, and the answer is not always straightforward. In this article, we will provide some general information about tax returns in Australia, and we will also provide some advice on how to determine whether or not you need to file a return.

Do I Need to Lodge a Tax Return?

The first step in determining whether or not you need to file a tax return is to determine your residency status. Australian tax law distinguishes between residents and non-residents for tax purposes. In general, residents are taxed on their worldwide income, while non-residents are taxed on income earned in Australia only.

There are a number of factors that are used to determine residency status, including:

  • Your domicile or permanent place of residence
  • The length of time you have spent in Australia
  • The nature of your activities in Australia
  • The intention of your stay in Australia

If you are a resident for tax purposes, you will need to file a tax return. If you are a non-resident, you may still need to file a tax return in some cases. For example, if you have income from Australian sources, you will need to file a return.

What Types of Income Are Actually Taxable in Australia?

Income that is taxable in Australia includes:

  • Employment Income
  • Business Income
  • Investment Income
  • Rental Income
  • Capital Gains
  • Retirement Income
  • Other Income

When Do You Not Need to Lodge a Tax Return?

Generally speaking, if you are an Australian resident for tax purposes and you earn income from employment, investments, or other sources, you will need to file a tax return. However, there are some circumstances where you may not need to file a return, and these include:

  • If your only source of income is from a job or jobs, and your employer withholds tax from your wages.
  • If your only source of income is from government pensions or benefits.
  • If you earn less than the tax-free threshold. For the 2021-22 financial year, the tax-free threshold is $18,200. This means that if your income for the year is less than this amount, you do not need to pay any income tax.
  • If you are a foreign resident for tax purposes, and all of your income is from Australian-sourced investment income, such as interest, dividends, or rent.
  • If you are a foreign resident for tax purposes, and your only income is from Australian employment, you will still need to file a tax return. However, you may not have to pay any tax on this income.
  • If you are a foreign resident for tax purposes and you receive a working holiday visa, you may be able to claim the tax-free threshold.
  • If you are an Australian resident for tax purposes and you have a spouse who is a foreign resident for tax purposes, you may be able to claim a tax offset.
  • If you are an Australian resident for tax purposes and you have a dependant who is a foreign resident for tax purposes, you may be able to claim a tax offset.

Conclusion

It’s essential to understand whether or not you need to file an Australian tax return, as not doing so may result in penalties and interest. The best way to determine whether or not you need to file a return is to use the Australian Taxation Office’s (ATO) tax return lodgment tool, which can be found on the ATO’s website.

SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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7 Australian Tax Incentives You Should Know About and Use

Over the past couple of years, the federal and state governments have provided a lot of support to help businesses navigate through the troublesome time caused by COVID-19. However, there are many other tax incentives that you may not be aware of that are available, and knowing what they are can allow you to enjoy more savings in your effort to grow!

So, what are those incentives, you ask? Let’s find out together:

1. R&D Incentives

As the name implies, research and development incentives motivate companies such as yours to engage in R&D activities. This is done by helping you offset costs that pertain to eligible R&D activities, and the amount is equal to 30% of the corporate tax rate for big companies and 25% for smaller companies. 

Additionally, companies with an annual turnover of less than $20 million will also receive an 18.5% premium! Companies with more than $20 million in annual turnover are eligible for a premium of up to 8.5%.

2. Patent Box Regime Incentives

Normally, corporate income is taxed at either 25% or 30%. However, this incentive is aimed toward Australian medical and biotech patents, lowering the tax income on those down to just 17%. That’s nearly half the tax previously imposed, which is a huge incentive for companies that are struggling and do not want to deal with higher corporate income tax.

3. ESIC Incentives

ESIC, short for early-stage innovation company, is aimed at startups and brand-new businesses. It offers a non-refundable carry-forward tax offset for any amount invested into them, with the max cap being $200,000 a year.

4. FEDA Incentives

Full expensing of depreciating assets is a type of incentive that helps businesses make more investments. Any business that is eligible for it and has an aggregated turnover of less than $5 billion can fully deduct the cost of eligible assets that are depreciating.

5. Loss Carry-Back Incentives

The main goal of loss carry-back incentives is to help companies enhance their cash flow by using their losses up to the 30th of June, 2023. For companies with less than $5 billion aggregated turnover can carry back their tax losses from the current income tax year to offset taxed profits as far as 2019!

6. Digital Games Tax Incentives

Specifically for the digital game industry, this incentive is aimed at helping international companies come to Australia to develop digital games. These companies are offered a 30% refundable tax offset for Australian qualifying games with a minimum investment of $500,000.

Note that certain games are excluded from this incentive, such as games that utilise gambling features.

7. Brewers and Distillers Tax Incentives

As the name implies, this incentive is aimed at supporting Australia’s alcohol manufacturing industry. This enables eligible brewers and distillers to receive up to 60% of any excise paid on the alcohol produced. This number is capped at $350,000, a much higher figure than the previous $100,000.

Conclusion

As you can see, there are a bunch of incentives out there that you can use to boost your cash flow, save money, and more to help you survive and even thrive during these troubling times. That said, there are still plenty more incentives out there, and there can be plenty of changes and additions to be made to the current incentives. So, always be sure to reach out to a professional accountant for help to stay up to date on these things and to also make the most out of these incentives to benefit from them!

SMB Accounting offers various small business accounting services to help companies stay on top of their taxes and more. If you are looking for an accountant in Caloundra to assist you, get in touch with us today!

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Your Beginner’s Guide to Australian Tax Deductions

Tax deductions may seem complicated at first, but they’re actually pretty straightforward if you know what you’re doing. To make things easier for you, we thought it would be useful to put together a brief article about how tax deductions work. If this is something that you’re interested in learning more about, read on for a beginner’s guide to Australian tax deductions.

How Do Tax Deductions Work?

When submitting a tax return, anyone who is employed can claim deductions for any expenses they paid while working. To be able to claim deductions, the taxpayer is required to have met the following criteria

  • You must have documents to prove it.
  • You must spend the money yourself.
  • The expenses must not have been reimbursed.
  • The expenses must be work-related.

Keep in mind that if the expense you are claiming is for both work and private purposes, you can only claim a portion of the costs that were utilized for work.

What Are the Different Types of Deductions?

Business travel expenses are typically tax-deductible. You are entitled to deduct the work-related travel expenses that correspond to the business-related costs of using your car to do your job. You must be able to prove the use of your car for business travel in order to deduct any car expenses.

Do you have to wear a suit to work, or is a uniform required? Or do you need to wear clothes that bear the logo of your company? Maybe you work at a shop that sells clothes, and you need to come in wearing clothes from that shop. In any case, you have to dress according to the dress code at work, and this expectation might carry over into your interactions with the taxman when it comes time to file your taxes. If you wear clothing that is specific to your occupation, you can claim the cost of purchasing and laundering it. Otherwise, you cannot. (For example, chef’s pants.) You can claim the cost of special clothing that you wear to protect yourself from injury or illness, such as a uniform for construction workers that protects them from dust and sun. (For example, sun protection can be claimed if you work outdoors.)

If you carry out all or part of your employment activities from home, and you have a designated room set aside as a home office, then you can claim a tax deduction. Ideally, you should have a room set aside as a home office, but if you don’t have one, or if you are using a dual-purpose room (e.g. dining room), you can still claim expenses for the time that you have exclusive use of the room.

As with anything tax-related, record-keeping is critical for a home office deduction. You may be entitled to deductions for equipment used for work (e.g. computer, phone), general repairs and maintenance on your house that are work-related (e.g. electricity), and some other costs (e.g. Internet connection). Note that as a general rule, you can only claim for expenses in proportion to the area of your home that is used for work.

Conclusion

We hope this article proves to be useful when it comes to helping you gain a better understanding of how tax deductions work. While it may seem complicated at first, the information that we’ve outlined above should help make things more manageable. Feel free to reread this article if you need a quick refresher on tax deductions.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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Why a Secure Trust Account Is Crucial for Real Estate Agents

Real estate agencies hold many millions of dollars in their trust accounts. These funds are held ‘in trust’ for clients and customers of the agency. It is one of the fiduciary duties of an agent to keep their clients’ funds safe. A fiduciary duty is the highest standard of care in equity or law.

Why a Secure Trust Account Is Crucial for Real Estate Agents

A real estate agent is required to act in good faith and with loyalty to a client’s best interests. Additionally, an agency must take every reasonable precaution to protect the integrity of client deposits. With that in mind, having a secure trust account is critical for the success of every real estate agent. 

A secure trust account allows the agent to hold client funds without having to worry about how to protect them. Essentially, having a secure trust account ensures that the agent never has to worry about losing a client’s money.

What Is a Secure Trust Account?

A secure trust account is one that is held by a financial institution in a manner that will ensure clients’ funds are kept safe. This trust account is segregated from the agency’s operating account. An agency may open a trust account in order to meet its fiduciary obligations to both its clients and the real estate industry.

Keep in mind that removing money from the trust account for any other reason beyond the client’s request will be considered a criminal offence. That’s why every real estate agent needs to stay on top of their trust accounts and follow the best practices that can give peace of mind to all parties involved. 

How Do You Securely Manage Trust Accounts?

Tip #1: Track and Report Everything that Goes In or Out of the Trust Account

Each time an individual deposits money or checks into a trust account, the agent should prepare a proper records document. This document should include their signature, the date, and a statement describing the transaction (such as “cash deposit $10,000”). These records should be kept in a safe or secure location.

Tip #2: Set Strict Rules Regarding Processes and Procedures

Firms should establish strict rules for the handling of trust accounts. This includes everything from how cash deposits are made to how withdrawals are processed. In addition, these rules should be clearly communicated to all real estate agents handling trust accounts.

Tip #3: Assign Key Roles to Manage the Responsibility of Processing Trust Accounts

Trust account management, processing, and reporting can be extremely complex. It is important for the company to assign specific roles to those who are managing trust accounts. This will help to ensure all areas of the trust accounts are being properly handled.

Assigning roles will also mitigate common pitfalls such as absenteeism, errors, or something graver like money laundering, misreporting, and insider theft.

The Bottom Line: The Importance of a Secure Trust Account for Real Estate Agents

A secure trust account allows agents to manage all aspects of their clients’ and customers’ funds with the peace of mind that they are working in their best interest. This is especially useful in the real estate industry where client funds are frequently being transferred in and out of trust accounts. Because of this, it is important for agents to understand how to properly secure their trust accounts.

How Can We Help You?

There’s no denying that financial audits or reports can be incredibly overwhelming for some businesses. Thankfully, SMB Accounting has a team of highly skilled accountants who are equipped for this job.

Our accounting firm offers various financial services like individual tax returns, accounting for small businesses, self-managed super fund audits and more. If you’re looking for a reliable accountant in Caloundra to help you run your business, reach out to us today!

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6 Helpful Advantages of Internal Audits for Small Businesses

Small businesses benefit greatly from internal audits, and there are many more advantages than you might realize. In actuality, internal audits are relied upon by the majority of small businesses today. Hiring a specialist to conduct the internal audit is typically helpful for small organizations that have their hands full in various departments. 

The short answer would be that working with auditors is a cost-effective way of seeing where your company needs to make financial improvements. For a more in-depth look at the help that internal audits offer to your small business, the following are some of its most helpful advantages:

1) Gain Valuable Insight

The first benefit of an internal audit is that it supplies you with useful information. An internal audit allows you to examine your firm and identify areas for improvement. The audit will also assist you in determining whether there are any dangers to the company’s existence, and you can use it to track your company’s financial success.

2) Achieve Better Compliance

The internal audit will determine whether or not you comply with applicable laws and regulations. This will ensure that you are always running as effectively as possible. Compliance with regulations and legislation is necessary to avoid fines and penalties. No need to fret because internal auditing will assist you in accomplishing this.

3) Raise Efficiency

If you have never performed an internal audit, you should do so as soon as possible. The main goal is to achieve and maintain efficiency within the organization. You may not be aware of the progress your organization is making, but an audit can be seen as an eyeopener. This is because it will allow you to make sure everything is running smoothly, ensuring and raising efficiency in your operations.

4) Have Better Overall Control

Whether you have a larger company or a small business, you need to have sufficient control over everything that goes on. By conducting an internal audit, you will have better control over your company. If you are just starting, then you need to take precautions to make sure your business is secure, and the best option is to perform an internal audit.

5) Secure Processes

The main advantage of doing an internal audit is that it allows you to secure your business procedures. Internal audits can be quite beneficial to small businesses. A standard internal audit will ensure that everything financial is handled correctly and that the processes are completed. This is an excellent technique for small businesses to ensure everything is going well.

6) Prevent Business Risk

Internal audits will enable you to keep your firm safe from any unnecessary risks that can plague you throughout your operations. You will have a better chance of detecting possible issues if you have already identified them internally. These audits will also highlight flaws in your organization, allowing you to take corrective action.

Conclusion

 In conclusion, whether you are a large corporation or a small business, conducting an internal audit makes sure that everything is running smoothly. Readers should have a pretty good idea of what an internal audit is and how valuable it is for a business, so execute it now.

Looking for an audit of your processes? SMB Accounting does small business accounting with various packages available,  self-managed Super fund audits and Xero accounting software. Get in touch with us today!

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Essential Tips to Avoid a Huge Tax Bill as a Sole Trader

If you find yourself with a bigger tax bill than anticipated, don’t panic. With a little bit of planning, you can avoid this common issue for sole traders. All you need are a few software tools and a basic understanding of your tax schedule. Use our practical tips to better manage your income and taxes, and you’ll be on your way to avoiding a massive tax bill down the road.

Essential Tips to Avoid a Huge Tax Bill as a Sole Trader

1 – Be Knowledgeable About Your Tax Bracket and Tax Rates

Your effective tax rate is the tax rate you pay on your taxable income. The more you earn, the higher your tax rate will be. Your tax bracket is determined by your filing status and taxable income.

Certain expenses are deductible, meaning they will lower your taxable income and lower your tax liability. However, they’re only deductible if they’re business expenses. You’ll need to keep track of all your expenses, including mileage and travel, to ensure that you’re getting the most tax savings possible.

2 – Separate Business and Personal Accounts

A large tax bill usually occurs when your business and personal accounts are mixed together. Your business accounts and credit cards should not be used for personal items. Try to keep as much of your money in business accounts as possible.

Keep your business and personal finances separate and organized. Use separate checking accounts and business credit cards. If you’re self-employed, open your own business bank account. Then, once a week, transfer any money you earned that week into that account. This will help you keep track of your income, and it will also help you identify where you’re spending your money so you can keep a better eye on it.

3 – Anticipate Your Tax Bill

The easiest way to avoid a huge tax bill is to plan for it. Keep track of your income for the year. Try to anticipate what your final tax bill might be before it’s time to pay it.

If you have a home office, keep good records of your home office expenses. If you have a second car, keep a good track of how many miles you’re driving and what you’re driving it for. If you’re planning a big purchase, like a car or a home, consider how it will affect your taxes. Planning ahead will help you avoid a big tax bill.

4 – Hire a Tax Professional

The best way to avoid a huge tax bill is to hire a tax professional. A good accountant will make sure you’re doing everything properly and taking advantage of everything the government allows to lower your tax bill.

Good accounting firms will offer pre-filing tax services, year-end tax planning and tax preparation services. Those services can help you keep an eye on your business income and expenses as they happen throughout the year, which will ultimately help you minimize your tax bill.

Conclusion

A big tax bill can be stressful and overwhelming. A big bill could be in the thousands, and that money could have been used to pay bills, pay down debt or save for retirement. Fortunately, if you’re prepared, you can minimize your tax bill and avoid an unexpected tax bill.

If you need an accounting firms on the Sunshine Coast to help with your taxes, contact SMB Accounting. Our business does Individual tax returns, small business accounting with various small business accounting packages available, SMSF audits (self-managed super funds), as well as a Xero accounting software-based accounting business. We also offer the following audits: trust account audits, audits of non-profit organizations, audits of special purposes financial statements, special needs audits, and more.

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How to Know If Your Sporting Club Can be Tax Exempt

Sport is a significant part of Australian culture and social life. It provides entertainment and recreation and contributes to health and well-being.

Many sporting clubs, for example, are registered for tax exemption on the basis that they provide or contribute to the provision of facilities and materials, services and education to their members. Those are predominantly for social, cultural, recreational and sporting purposes.

Today, let’s explore how to know if your sporting club can be exempt. Here’s what you need to know:

What Type of Entity Is Your Organisation?

If your organisation is incorporated, it will be an Australian Public Company (or a non-registered public company) or a non-profit public organisation. Both categories of incorporated entities will require you to be a registered charity. If not incorporated, you might be a non-profit company, not-for-profit organisation, or non-profit public organisation.

To become a registered charity, you will have to apply to the Australian Charities and Not-For-Profit Commission (ACNC). The ACNC will tell you if your organisation can be a registered charity and if it can be a public company. If your organisation is already registered, it will provide you with the relevant details of your registration.

What Is Your Organisation’s Purpose?

Before engaging in tax exemption, your organisation must demonstrate that its purpose is charitable. It is for a public benefit, that it does not make a profit, and that it is not an organisation established for profit.

The ACNC has produced a set of public benefit principles to guide a group considering applying to be a registered charity.

Suppose your organisation is applying to be a public company. In that case, you will have to demonstrate that you need to be a company to achieve your purpose. In other words, you will need to show that you are a charitable organisation under the Corporations Act 2001.

Some examples of organisations that have been established as public companies include The Bupa Foundation and the Ronald McDonald House Charities.

Income Tax Exemption for Sporting Clubs

Suppose your organisation has been determined to be a public charity or a public company and has a purpose relating to the sport. In that case, it might qualify for income tax exemption.

To qualify for income tax exemption, your organisation must meet certain conditions. The only condition that applies to public charity status is that your organisation must be a “substantial contributor” to sport (or to providing facilities for sport).

The ACNC has published guidelines on what it considers a substantial contributor. Other than that, the income tax exemption that applies to public companies is very similar to the income tax exemption that applies to public companies.

Other Things to Consider

In addition to income tax exemption, there is a range of other taxes and duties available to sporting organisations that fit within the definition of a ‘substantial contributor to sport’.

The application of the GST and duty exemptions for public companies is similar to that for other public companies. For public companies that have been determined to be a public charities, there are GST and duty exemptions that apply to the charity’s activities. These are broadly similar to those that apply to non-profit companies.

The ACNC provides more information about the tax treatment of charities and public companies.

If you are considering applying for income tax exemption for your sporting club, it would be a good idea to seek the assistance of a tax professional.

The Bottom Line

Suppose your sporting club is a registered charity or a public company. In that case, your purpose is for sporting purposes, and you are a substantial contributor to the sport, you might be eligible for income tax exemption. Check with the Australian Charities and Not-for-Profits Commission to find out if your organisation can be a registered charity and if it can be a public company.

If you are looking for assistance with your trust account audits, we can help you. SMB Accounting does individual tax returns, small business accounting with various small business accounting packages available, audits, and more. Contact us today or sign up for our newsletter to learn more!

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