Setting up a business in any part of the world is a major decision. You need to research and plan carefully before you launch your business. In Australia, you have to learn all statutory requirements before applying for a business registration. You have to factor in certain things before starting a new business.
You can save time, money and stress by doing research. Seeking assistance from a financial planner or business advisor is always recommended. Conducting a feasibility study is also beneficial. Moreover, be honest when you ask yourself whether this is just a hobby or a genuine business. This will help you draw up your goals in terms of revenue, deductions and losses.
Choose the Right Business Structure
It is also essential to choose the business structure. Choose the one that best fit your needs. You save time and money if you choose right. Every structure has its own pros and cons that you will have to study and learn as it will help you determine the right licenses to run your business. There are four major types of structures:
- Sole trader – a single person operating the business on their own
- Partnership – a group of individuals or entities collectively operating a business, not as a company
- Trust – an entity that oversees property or income on behalf of others
- Company – a legal entity distinct from its shareowners
Whichever structure you pick, there are important things you need to accomplish. You must properly handle invoices, payments and other paperwork and obviously you have to fulfil your tax obligations. You must also learn the laws and obligations as an employer before hiring people.
Individuals are required to file a tax return annually. Your return states your income for the year and the amount of tax you paid. In Australian, individuals in the labour force are required to file a tax return if they fall in any of the following cases:
- tax was taken out from any payment you received for the financial year;
- you reside in Australia and your taxable income exceeded the tax-free limit; and
- you are an expatriate with an income of over $1.
Tax returns are filed from July 1 to October 31 for the past income year. If a registered tax agent prepared and filed your tax return on your behalf, you can file later than October 31 but your tax agent has to make this arrangement before October 31.
BAS & GST
For Australian businesses, a BAS (Business Activity Statement) is used to report and a pay multiple tax obligations, including fringe benefits, PAYG (pay as you go) instalments, PAYG withholding and GST. A BAS is also used by individuals who are required to pay PAYG instalments every quarter.
To assist in reporting against identified obligations, a BAS is tailored to each individual or company. Businesses make a self-assessment of their indirect taxes. The tax return can be filed and the amount paid electronically by person or by mail. File on time so you don’t incur fines and interest.
For businesses, they can file their activity statements using a paper form or online. Filing online is faster, and most of those who file quarterly receive an additional couple weeks to file (terms and conditions are applicable). An activity statement is used to report and pay the GST (Goods and Services Tax) that a business has accumulated and apply to get GST credits. A good number of companies report and pay GST quarterly and have an annual or monthly option.
GST is a 10% tax levied on most goods and services. It is imposed mostly on transactions in the manufacturing process, but is returned to all businesses in the manufacturing chain except the final consumer. Typically, businesses will add a GST in the products and services, and reimburse the GST collected from the sale of their goods and services.
Businesses and other enterprises, and specifically those with a GST turnover of $75,000 or higher, must register for GST (the cap for non-profit organisations is $150,000 or higher). Taxi drivers are required to register whatever their turnover is.
For registered businesses, GST is applicable to all goods and services you sell in Australia except if they are input-taxed or GST-free. GST is included in the price if the goods or service is taxable. Some education courses, most basic foods, and some medical, health and care products and services are GST free. All GST-registered businesses must provide tax invoices to their customers, collect GST and remit it to the ATO with your BAS.
Does your business need tax advice or guidance? Contact PJS Accountants. We offer skills and knowledge in managing your tax affairs with a full range of compliance, corporate and individual tax services. We service large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put your businesses at risk. Avoid this risk by engaging the services of experts.