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  • Company

    A company is a legal entity with higher set-up and administration costs. Companies also have additional reporting requirements.

    A company is run by its directors and owned by its shareholders.

    While a company provides some asset protection, its directors can be legally liable for their actions and, in some cases, the debts of the company. All directors of a company are required by law to verify their identity and get a director identification numberExternal Link (director ID).

    Companies are regulated by the Australian Securities & Investments Commission (ASIC).

    Key features

    In this business structure, the company:

    • must apply for a tax file number (TFN) and use it when lodging its annual tax return
    • is entitled to an Australian business number (ABN) if it is registered under the Corporations Act 2001. A company not registered under the Corporations law may register for an ABN if it is carrying on an enterprise in Australia
    • must be registered for GST if its annual GST turnover is $75,000 or more
    • owns the money that the business earns - the individuals who control the business cannot take money out of the business, except as a formal distribution of the profits or wages
    • must lodge an annual company tax return
    • usually pays its income tax by instalments through the pay as you go (PAYG) instalments system
    • pays tax at the company tax rate or lower company tax rate (if a base rate entity)
    • may be eligible for small business concessions
    • must pay super guarantee contributions (SGC) for any eligible workers. This includes you, if you are a director of the company, and any other company directors.

    Personal services income (PSI)

    If you have a company structure and the income the company receives is mostly for your personal efforts, skills or expertise, you need to work out if the personal services income (PSI) rules apply. If the PSI rules apply, the income will be treated as your individual income for tax purposes. This will also affect the deductions you can claim.

    See also

    Last modified: 01 Nov 2021QC 31734