The Tax Traps You Didn’t See Coming: What Every Small Business Owner Must Understand About Income Tax, GST, and PAYG
- Marketing Manager
- May 25
- 2 min read
Running a business is already a juggling act. Between serving customers, managing staff, and trying to get paid on time, it’s easy to let tax compliance slip into the “later” pile.
But here’s the catch: when it comes to tax, what you don’t know can cost you.
Ella’s Costly Mistake: A Tax Story Every Freelancer Should Read
Meet Ella, a freelance graphic designer who turned her side hustle into a full-time gig. She was smashing client projects, making decent money, and felt on top of her game.
Then tax season hit.
She hadn’t set aside enough for income tax. She didn’t realise she needed to register for GST after crossing the $75,000 threshold.
And PAYG? She had no idea she was supposed to be withholding tax from a contractor she’d brought on.
It was a wake-up call—and one that cost her thousands.
Let’s help you avoid that same scenario.
What Taxes Apply to Small Businesses in Australia?
1. Income Tax: Why It's Not Just for Employees
If you’re a sole trader, company, or partnership, your business profits are taxable. You’ll need to report this income accurately and on time.
But it’s not always straightforward—especially if you:
Have irregular cash flow
Claim deductions
Reinvest profits
💡 Pro Tip: Set aside around 25-30% of your net business income regularly so you’re prepared when tax season rolls around.
2. GST Registration: The $75K Rule That Could Cost You
If your business earns more than $75,000 per year in revenue, you must register for Goods and Services Tax (GST).
That means:
Charging 10% GST on your invoices
Lodging Business Activity Statements (BAS), usually quarterly
Paying collected GST to the ATO
Missing the registration deadline can result in penalties and having to pay back GST.
3. PAYG Withholding: What Business Owners Must Know
Many business owners think PAYG (Pay As You Go) only applies to employees. But if you hire contractors or earn income that triggers PAYG instalments, it applies to you too.
This means you may need to:
Withhold tax from payments to others
Pay PAYG instalments on your own income, based on last year’s return
Not sure if PAYG applies? Don’t risk guessing—ask an expert.
Book your free tax chat today →
Why You Shouldn’t DIY Your Tax Strategy
The ATO doesn’t accept “I didn’t know” as an excuse. Penalties for incorrect reporting, late payments, or non-compliance add up—fast.
Smart business owners treat their tax advisor like their GPS: they don’t start the journey without one.
Book a Quick Chat Before You Fall Behind
At ProfitCloud.online, we help Australian business owners stay compliant and maximise what they keep.
Whether you're a new sole trader or a growing team, we’ll walk you through:
Income tax, GST, PAYG and what applies to you
Setting up simple systems to stay on top of obligations
Claiming smarter, not harder
Book your free tax chat today → No pressure. Just clarity.
TL;DR: Small Business Tax Essentials
✅ Know what income you need to declare.
✅ Register for GST once you hit $75,000 turnover.
✅ Understand if PAYG applies to you or your contractors.
✅ Don’t leave it to guesswork—talk to a tax pro.
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