Setting Up Business and Financial Reporting Essay

Setting Up Business and Financial Reporting - Essay Example Income tax differs as per different forms of business structure like the sole proprietorship, partnership, and company. "Pass-through" tax entities like sole proprietorships, partnerships and limited liability companies are charged taxes as per the net profits they generated (Business.gov.au, 2015b). Australian industrial or business environment system requires sound understanding and selecting feasible business structures to gain success. Owners have to explore the guideline promoted by Australian Taxation Office. It will help in learning income tax rules for different type of business in Australia. Unincorporated business owners are responsible to pay income taxes on the basis of net profits earned by the business during any fiscal period. Reserves and provisions are not considered as a part of profits while calculating income tax. It creates issues for the partnership or sole proprietorship businesses (Business.gov.au, 2015c). On the other hand, partnership business is quite compl ex as partners many a time avoid reporting their shares on corporate profits, which reduces personal tax returns. Partners report salaries, bonuses and dividends incomes as their taxable income. Therefore, it can be said that owners of partnership firms enjoy the tax advantage. In this scenario, all the four partners Mary, Martha, John, and James are responsible to pay tax individually and on-behalf of their new day spa business. Australian Taxation Office can face the potential avoidance of reporting share from the business.