this post was submitted on 14 Dec 2024
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Yeah so effectively everything that is paid to employees is considered an expense to business.
So for simple numbers
Bring in 10k through work,
Pay 5k in wages and then pay tax on the other 5k Small businesses is Australia pay 25 percent so you then owe 1250 in tax
Not pay tax on the 10k then make wages out of the remaining 7500
Oh right, i see what you mean. Its avoiding double taxation of the same monies.
Because the employees pay is taxed also, if the tax office were to tax the whole $10,000 it would mean they effectively tax the same set of money twice. In this example that $5000 of employee wages would be taxed first as business tax, then as income tax.
Yeah pretty much, but for a company it works out well for the owner who pays themselves. Makes it very easy to report minimum profits while paying yourself well