Running a small business in Australia means navigating ever-shifting developments in opportunities and obligations, and paying taxes is one of them. Managing the full picture—what taxes apply, how to register, what you can legally deduct, and how to stay compliant without losing momentum—can have a real impact on your financial health.

Below, you’ll find what you need to understand and manage small business taxes in Australia.

What’s in this article?

• What are the main taxes small businesses must pay in Australia?
  
• How do small businesses register for taxes in Australia?
  
• What tax deductions are available for Australian small businesses?
  

What are the main taxes small businesses must pay in Australia?

Most small businesses in Australia need to manage four core obligations: income tax, goods and services tax (GST), pay as you go (PAYG)—withholding or installments, or both—and possibly fringe benefits tax (FBT). Depending on your business’s size and sector, payroll tax or other specialist taxes might also apply. Your exact tax obligations depend on your structure (e.g., sole trader, company, trust), the business you’re in, how much you earn, and where you’re located.

Income tax

All businesses pay tax on profits, but the rate depends on your setup:

• If you run a company, the standard corporate tax rate is 30%. But if your business earns less than $50 million Australian dollars (AUD) in turnover and at least 20% of your income comes from active trading (not passive investments), you qualify for the reduced 25% rate.

• If you’re a sole trader or partnership, you’re taxed at individual rates, because any earnings are included in your personal tax return. These are progressive, depending on your taxable income.

GST

GST is a 10% tax on most goods and services sold in Australia. You’re required to register if your business’s annual turnover hits $75,000 AUD. Once you’re registered, you’ll need to:

• Add 10% GST to your prices

• Collect the tax from customers

• File with the Australian Taxation Office (ATO) through a business activity statement (BAS)

• Claim back GST paid on business expenses (called input tax credits)

If your turnover is less than $75,000 AUD, you don’t have to register. But without a GST registration, you can’t claim input tax credits. Some small businesses choose to register voluntarily to recover GST on startup costs or signal credibility to larger clients.

PAYG

PAYG withholding

If you have employees, you’re required to:

• Withhold income tax from wages

• Remit those withheld amounts to the ATO and report them via your BAS

• Register for PAYG withholding before you start paying any of your employees

This isn’t specifically a tax on your business. It’s a mechanism for passing on your employees’ income tax throughout the year.

PAYG installments

If your business has substantial income, the ATO might require you to pay your own income tax in advance throughout the year, rather than in one big sum at the end. These quarterly payments are based on your income from the prior year or an estimate of your earnings from the current year.

Payroll tax

Unlike income tax or GST, payroll tax is run by the states and territories, and it only applies once your total wage bill crosses a certain threshold. For example, in Victoria, you’ll owe payroll tax if the total wages you pay exceed $1 million AUD per year beginning in July 2025.

If you’re a small team, this threshold might not affect you. But if you grow quickly and start hiring across multiple jurisdictions, you’ll need to monitor your payroll and register with each state revenue office when it becomes relevant.

FBT

FBT applies when you provide employees with benefits beyond their salary, such as:

• Company cars

• Paid parking

• Low-interest loans

• Event tickets

FBT is a federal tax paid by the employer. It’s charged on the gross-up taxable value of those benefits.

You need to register for FBT and lodge an annual return if you offer these kinds of benefits. Many small businesses can avoid FBT by not offering fringe benefits.

Other taxes

Certain types of businesses and assets are subject to other potential taxes, including:

• Capital gains tax (CGT) for profits from the sale of assets

• Excise duties for alcohol, tobacco, and fuel

• Wine equalisation tax (WET) for wholesale wine

• Luxury car tax (LCT) for vehicles above a certain value

These aren’t everyday issues for most small businesses, but they might matter in some industries or at certain stages of growth.

How do small businesses register for taxes in Australia?

To register for taxes in Australia, you need to obtain a tax file number (TFN) and often an Australian Business Number (ABN). Here’s how to register and what you’ll need.

TFN

Every business needs a TFN to lodge tax returns and interact with the ATO. Sole traders can use their personal TFN, while companies, trusts, and partnerships need a separate TFN for the business.

Businesses can apply for a TFN separately or while completing their ABN application.

ABN

An ABN is an 11-digit ID for your business issued by the Australian Business Register (ABR), which is managed by the ATO. It’s used to identify your business across invoices, BAS forms, government systems, and more.

You can apply online via the ABR.

You need an ABN to:

• Register for GST

• Claim GST credits

• Issue compliant tax invoices

GST

GST registration is mandatory when your annual turnover reaches $75,000 AUD. Even if you’re below the threshold, you can register voluntarily. Some businesses do this to claim back GST on purchases made during their asset-heavy early years.

You can register online once you have an ABN.

PAYG withholding

If you plan to hire employees, you need to register for PAYG withholding before you make the first payment from which you withhold tax.

This registration can be done online if you have an ABN. If you don’t have an ABN, you can register by phone, mail, or fax.

FBT

You also need to register for FBT if you plan to provide perks such as cars, entertainment, or loans to employees. You can register for FBT online if you have an ABN. If you don’t have an ABN, you can register by phone, mail, or fax.

State tax registrations

Payroll taxes are administered at the state or territory level. You’ll need to register separately with your state’s revenue office after crossing a certain threshold. Registration is typically handled through your state’s online portal.

If you’re just starting, the easiest way to handle all your tax registrations is to use the federal government’s Business Registration Service website. It walks you through registering for an ABN, GST, PAYG withholding, FBT, and more.

What tax deductions are available for Australian small businesses?

Running a business means taking on more responsibility, but it also opens the door to deductions that can reduce your taxable income. If you know what’s eligible (and how to document it), you can materially lower your tax bill. Below are the major deductions and small business concessions in effect in Australia, including both everyday operating expenses and longer-term investments.

General business expenses

You can deduct most costs directly tied to earning your income. That includes:

• Office rent and utilities

• Business insurance premiums

• Staff wages and super contributions

• Marketing, subscriptions, and software costs

• Travel for business purposes (e.g., flights, hotels, and meals while traveling)

For any expense that’s partially personal (such as a shared mobile plan), you can only claim the portion for business use. Keep your receipts, invoices, and logs—the ATO requires documentation.

Depreciation and asset write-offs

Large purchases are usually depreciated over time. But small businesses have access to simpler rules that allow for faster deductions.

Instant asset write-off

An instant asset write-off, which is available to businesses with aggregated turnover of less than $10 million AUD, allows a business to immediately deduct any asset that costs less than $20,000 AUD. This $20,000 AUD per-asset threshold applies to assets first used or installed between July 1, 2023 and June 30, 2025. There’s no limit to the number of eligible assets—it’s a per-item rule, not a cap on the total.

Small business income tax offset

If you run an unincorporated business (such as a sole trader or partnership), you’re eligible for an annual tax offset of up to $1,000. This is available to businesses with turnover of less than $5 million AUD, and it is automatically applied when you lodge your personal return. It’s not huge, but it closes the gap between how individual and corporate taxes are treated.

Capital gains tax concessions

If you sell business assets (or the business itself), you might qualify for small business CGT concessions, which can eliminate or reduce the tax you owe on capital gains. These include:

• The 15-year exemption, if you’re retiring and have owned the asset for over 15 years

• The 50% active asset reduction, which cuts CGT owed in half

• The retirement exemption, which lets you disregard up to $500,000 AUD of gains

• Rollover relief, which lets you defer capital gains by reinvesting in a new asset

Many of these can be used together, but you must have aggregated turnover of less than $2 million to be eligible.

Other deductions and concessions

Prepaid expenses

You can deduct expenses that will be delivered in a later income year as long as the coverage period is 12 months or less, and it ends by the next financial year.

Startup costs

Certain startup costs incurred while setting up your business structure, such as legal and accounting services, can be fully deducted up front, rather than being capitalized over time.

Bad debts

If you report unpaid income in a current or previous tax return that’s unrecoverable, you can deduct the loss—as long as you properly record the write-off.