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When you start a business, there are tax and super responsibilities you need to be aware of, including:
The tax implications of your business structure
Whether you’re entitled to an ABN
Registering your business
Records you need to keep
Deductions you can claim.
As you get your business up and running, there are a few things you may need to consider, including:
When your tax and other obligations start – this will depend on whether you are in business yet
The implications of the structure you choose – tax and legal
The location of your business (such as working from home).
There are four commonly used business structures in Australia:
🔘 Sole trader
It’s important to understand the responsibilities of each structure because the structure you choose may affect:
🔘 The tax you’re liable to pay
🔘 Asset protection
You’re not locked into any structure and you can change the structure as your business changes or grows.
If you’re unsure which structure to choose, we recommend you contact us.
As soon as your business is running you’re going to face new obligations. Understanding what you need to do from an early stage will help you stay on top of things.
REGISTER YOUR BUSINESS
When you start your business there are a number of registrations you need to consider.
GET AN ABN
If you’re starting a new business you may need an Australian business number (ABN). An ABN is a unique 11-digit identifier that makes it easier for businesses and all levels of government to interact. Not everyone is entitled to an ABN, so the registration process will ask specific questions to determine your entitlement to an ABN.
Not everyone is entitled to an ABN. You’re entitled to an ABN if you’re:
✔️ Carrying on or starting an enterprise in Australia
✔️ Making supplies connected with Australia’s indirect tax zone
✔️A Corporations Act company.
To work as a business you’ll need an ABN, which generally means you:
🔘 Provide products and services directly to your customers, whether that’s the public or other businesses
🔘 Source your own customers, for example by advertising your products and services
🔘 Quote and invoice for work, including setting or negotiating prices
🔘 Have a separate business bank account and your own business insurance such as public liability and WorkCover
🔘 Lodge and report all business income, even if the business earnings are below the tax free threshold.
You will need an ABN to:
✔️ Operate in the GST system, including claiming GST credits
✔️ Avoid pay as you go (PAYG) tax on payments you receive
✔️ Confirm your business identity to others when ordering and invoicing
✔️ Connect to Manage ABN Connections or get an AUSkey to transact online with government agencies
✔️ Be endorsed as a gift deductible recipient or an income tax exempt charity.
REGISTER YOUR BUSINESS NAME
If you’re applying for an Australian business number (ABN), you can also apply for a business name and register for secure online authentication and taxes, like GST and PAYG withholding, at the same time.
Most businesses will need to apply for a registered business name with the Australian Securities & Investments Commission (ASIC).
You can carry on a business in your own name without registering a business name if you don’t change or add anything to your name. For example, John Smith doesn’t have to register a name to trade as J Smith or John Smith, but he does to trade as John Smith Landscaping.
To apply for a registered business name you will need to have applied for or have an ABN.
All businesses will need to register all trading names as a business name with ASIC in order to continue operating with it. ABN Lookup will only display business names registered with ASIC from this date.
GETTING AN AUSTRALIAN COMPANY NUMBER
If you plan to run your business through a company, you need to register your company and get an ACN. You do this with ASIC when you start your company. You need to get your ACN before you can get your ABN and tax registrations
You need to set up a good record keeping system to track your income and expenses right from the start. This helps you know how your business is going, as well as meet your tax responsibilities and be able to claim all the deductions to which you are entitled.
If you’re thinking of taking on workers it’s important to understand you will have extra responsibilities. For example, you may have to:
Deduct tax from their pay and send it to the ATO
Pay super contributions to their nominated super fund, and
Pay fringe benefits tax if you provide them with benefits in addition to their wages.
PAYING TAX IN YOUR FIRST YEAR
In your first year of business, you can stay on top of your obligations by:
Making tax pre-payments into your tax bill account
Putting money aside for your expected tax bill
Voluntarily entering into instalments
PAYING TAX BY INSTALMENTS
Once you lodge your first income tax return and report a tax-payable amount above a certain threshold, you will automatically enter the pay-as-you-go (PAYG) instalment system.
If you voluntarily enter into instalments prior to lodgement of your first tax return, you will be able to make quarterly payments towards you tax bill.
Once you’re up and running, you’ll need to report your business income and other tax information. The key reports you should be aware of are:
Business Activity Statement (BAS)
🔘 The main taxes you will report on will be GST (if you’re registered for GST)
🔘Any tax you withhold from employees’ pay
🔘 Instalments towards your own tax once you are in the pay as you go instalments system.
🔘Income tax return
To report your personal and business income and claim deductions.