Franchising and your tax obligations

Franchisees

Franchisee businesses can operate under various structures (for example a partnership or company). Like any business, your structure, earnings and assets will determine your taxation obligations.

Ongoing franchise fees are often deductible in the year you pay them. You might be able to deduct other payments including training fees and loan interest from your taxable income.

When you buy, sell, transfer or terminate a franchise there may be taxes applicable, including Capital Gains Tax (CGT) and Goods and Services Tax (GST).

Franchisors

As a franchisor, you need to understand your tax obligations and how franchising fees are treated for tax purposes. It's also important to review your income tax and Goods and Services Tax (GST) reporting requirements. In most cases all payments you receive from a franchisee will be assessable income. They will also involve GST.

As with any business, taxation requirements will be determined by your business structure, assets and income.

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