ASK AN ACCOUNTANT
Want to know EXACTLY what you NEED to get your business off the ground? We sit down with three ACCOUNTANTS to find out just that.
how to start a business, organise payroll and figure out that bas statement
HOW DO I SET UP MY BUSINESS?
WITH CASSANDRA SCOTT, A REGISTERED BAS AGENT AND A DIRECTOR OF BRISBANEBASED LAURUS BOOKKEEPING.
DECIDE ON THE RIGHT BUSINESS STRUCTURE
The first consideration when setting up a new business is deciding on the most appropriate business structure. The most common trading structures you will come across are: Sole Trader, Partnership, Trust and Company (Pty Ltd, or Ltd if listed).
A Sole Trader is the simplest of the trading structures, and you can operate your business just under your own name – you don’t even need a business name registered. The risk with being a Sole Trader is that you and your assets are fully exposed. In the event that something goes wrong, and you have creditors chasing you for money, your personal assets (yes… including the house) are on the line. As a Sole Trader, any business profit is deemed to be your taxable income, and taxed accordingly.
A Partnership is an extension to a Sole Trader. It is essentially more than one person, entering into a ‘partnership’ arrangement. The same risks as being a Sole Trader apply, with the potential for all partners to be exposed in the event of issues. Profit is distributed in accordance with the Partnership Agreement, deemed as income, and is taxed accordingly.
Trusts are a little more complex and are often used for asset protection, the ability to distribute profits to beneficiaries, manage succession planning and to gain specific tax advantages. Profits are distributed and managed in accordance with a Trust Deed.
A Company structure has at least one shareholder, but can also have many, with the opportunity for each to contribute capital as required. Companies can provide personal asset protection and tax advantages (they pay a flat tax rate: in Australia, for 2016/2017, the rate has reduced from 30 per cent to 28.5 per cent for companies with an aggregated turnover below AU$2 million).
REGISTER YOUR BUSINESS
Aside from the standard requirements of setting up a business, such as registering with ASIC (asic.gov.au), registering for an ABN (abr.gov.au), registering with the ATO (ato.gov.au) for taxes such as goods and services (GST), pay as you go withholding (PAYGW), fringe benefits (FBT) and fuel tax credits (FTC), it is worth considering the legal requirements of registering business names, domain names and even brands or trademarks to ensure that you are not infringing on an already established (and registered) brand.
Depending on your state and payroll size, you may also need to register for payroll tax, and if operating across more than one state, you may need to register in multiple states. Workers’ compensation is another consideration, and again, you may need to register in more than one state if you have employees working in those states.
GET AN ABN
If you are operating an enterprise, you need an ABN, and registration can be done online via the Australian Business Register. You need an ABN prior to commencement of trading. If you provide services to a business and do not have an ABN, then legally the business should withhold 49 per cent of the payment due to you and remit this to the ATO.
REGISTER FOR GST
In general, a business does not need to register for GST (which means they charge GST on their invoices, and can claim GST credits back on payments made), until their current or projected turnover hits AU$75,000 (AU$150,000 or more for non-profit organisations). This is not annualised turnover, but rather the turnover in the current and preceding 11-month period.
If using an online webstore, it is important to check the settings to make sure that GST is being charged correctly, on both the products being sold, and also the shipping. Generally, if goods or services are being supplied to an overseas entity, GST may not be chargeable and many webstores allow this differentiation.
You must also register for GST under the AU$75,000 threshold if you provide taxi travel (and this includes Uber drivers).