10 Steps to Setting Up Your Business
in Australia
As the old
saying goes there is nothing surer than death and taxes. Now that you
are buying or setting up a business you can add paperwork and record
keeping. So lets look at some of the requirements and practical steps to
make running your business a whole lot easier.
1. Decide on the structure
of your business - eg sole trader, partnership, trust or company.
2. Register a business
name if required - this is done through the Department of Fair Trading.
3. Tax obligations in
setting up a business - .
-
Apply for an
Australian Business Number (ABN) and a Tax File Number (TFN) (if a
new entity)
-
Registering for GST -
if the turnover is over $70000 registering is mandatory - if under
then it is optional. Remember that if the business/entity is not
registered then imput tax credits cannot be claimed.
-
Deciding how often to
fill in a BAS - if turnover under $20m you may elect monthly or
quarterly. Take into consideration that monthly comes around very
quickly.
-
If turnover under $1m
you may elect either cash or accrual method - make sure you know the
difference and how it will effect your cash flow before making the
election.
-
Check on obligations
for PAYG withholding, FBT, Diesel Fuel Rebate. Remember if you are
forming a company and you are an employee of your company then the
company is liable for PAYG for you.
Hint: The
application form that covers the above will ask who are the contact
persons able to discuss your business. If you want your Tax Agent or
Accountant to talk to the ATO for you then make sure they are listed.
4. Know your obligations
when employing staff - eg Work Cover, Superannuation and PAYG
withholding.
5. Setting up your records
- decide what is easiest for you. This will obviously depend on the type
of business. Questions to ask:- will a manual system with cash books
suit me? : do i need an accounting software package - can i use it?:
will E record from the ATO be sufficient.
6. To make life easier
when it is BAS time - keep your records up to date so you do not have
the last minute rush. This will help with your annual tax return as
well. Generally the ATO has been lenient on late lodgement of BAS returns
but this will cease as from the 1/7/02. File records away so they can be
easily located if an ATO auditor wishes to see them.
Hint:- Open a
separate bank account for GST, PAYG, Income Tax and other ATO payments
so you have the money when it is required and you are not tempted to
spend it on running your business. Remember it is the "tax man's" not
yours - he will want it. If you have to borrow money to meet you tax
obligations then the interest component is tax deductible.
7. Keep all
business books, receipts, tax invoices etc for 5 years.
8 You are able to claim
deductions for outgoings necessarily incurred in gaining assessable
income. You can not claim those of a private, domestic or capital
nature. Some expenses of a capital nature may however be able to be
depreciated - eg plant and equipment.
9. Types of deductions
include - Accounting and Tax Agent fees, advertising, associations and
memberships, business premises (rent and outgoings, lease payments,
interest on loan, rates, electricity, telephone insurance), cartage and
freight, depreciation, insurances - public liability, sickness and
accident etc, materials/ stock, repairs, tools, travel (taxis, airline,
accommodation and meals while away on business).
Motor Vehicle expenses -
there are four ways to claim -
If the business travel is
over 5000kms you may claim
-
1/3 of all running
expenses (including depreciation) - all receipts to be kept but no
logbook.
-
12% of the cost of the
motor vehicle up to the deemed depreciation limit - proof of
purchase cost
-
Log Book Method -
requirements - a logbook must be kept for 12 consecutive weeks to
establish the business percentage - this is done every 5 years. All
receipts must be kept.
If business travel is
under 5000kms -
10. Before buying or
setting up a business make sure you have the right information to be
able to make an informed decision. |
