A company is a distinct legal entity with higher set-up and administration costs because of additional reporting requirements.
Companies are regulated by the Australian Securities & Investments Commission (ASIC).
A company is run by its directors and owned by its shareholders. A company provides some asset protection but directors can be legally liable for their actions and, in some cases, the debts of a company.
The main features of a company business structure are:
- a company must apply for a Tax File NumberExternal Link (TFN) and use it when lodging its annual tax return
- a company registered under the Corporations Act 2001 is entitled to an Australian business number (ABN). A company not registered under the Corporations Act may register for an ABN if it's carrying on an enterprise in Australia
- a company can register for Goods and Services Tax (GST) if it's carrying on an enterprise. A company must be registered for GST if its annual turnover is $75,000 or more ($150,000 for non-profit organisations)
- the money a business earns belongs to the company, not individuals
- companies must lodge an annual company tax return showing income, deductions and income tax liable to pay
- companies usually make Pay As You Go (PAYG) instalments, credited against total annual income tax. The amount of tax it's liable to pay is reduced by any PAYG instalments paid during the year
- companies have no tax-free threshold
- a company pays income tax on its assessable income (profits) at the company tax rate and may be eligible for tax concessions
- a company may treat income and deductions relating to personal services income (PSI) differently
- if the company has any eligible workers, it must pay them super guarantee contributions. This includes you, if you are a director of the company, and any other company directors.
Personal services income
A company may treat income and deductions relating to personal services income (PSI) differently. The income may be treated as your individual income for tax purposes.
A company is a distinct legal entity with higher set-up and administrative costs because of additional reporting requirements.