Setting up business in Australia

Setting up business in Australia

Starting a business anywhere in the world is big decision. It needs careful research and planning before you start trading. In Australia, it is vital you find out all the necessary statutory obligations before registering the business. Some things may be consider before venturing to a new business. Do research. Doing research can save time, money and stress. You may want to seek advice from business advisor, financial planner. Having a feasibility study can also be a big help. Also, ask yourself if this is a hobby or a real business. This can determine your target when it comes to revenue, deductions and losses. More importantly, choosing the business structure. You have to choose what structure best suit your needs. Having the right structure can save your business time and money. Each structure has advantages and disadvantages that you will need to investigate carefully. These can determine the licenses you will need to operate. The four main types of structures are as follows:

  1. Sole trader – an individual trading on their own
  2. Partnership – an association of people or entities running a business together, but not as a company
  3. Trust – an entity that holds property or income for the benefit of others
  4. Company – a legal entity separate from its shareholders.

Regardless of what structure you choose, there are necessary things you must do. You need to manage your invoices, payments and other paperwork and of course, you must comply your tax obligations.  And before getting any workers to work for you, you have to understand the statutory obligations that apply to employees. Most people need to lodge a tax return each year. Lodging tax return will tell how much income you received and tax you paid. In Australia, as an individual, you must lodge a tax return if any of the following apply: tax was deducted from any payments made to you during the financial year, you are an Australian resident and your taxable income was more than the tax-free threshold, you are foreign resident and you earned more than $1 in Australia during the financial year. Lodging tax return can be done between 1st of July to 31st of October for the previous income year. If you use a registered tax agent to prepare and lodge your tax return, you may be able to lodge later than 31st of October but you need to contact a tax agent before 31st of October to arrange this. After the end of the income year (30 June), your employer will give you a document called a ‘payment summary’. Your payment summary shows how much you earned and how much tax was deducted from your wages. If you are leaving Australia before 30th of June, you may be able to lodge your tax return early. For businesses in Australia, they use BAS (Business Activity Statement) to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Individuals who need to pay quarterly PAYG instalments also use Activity statements. Activity statements are personalised to each business or individual to support reporting against identified obligations. Businesses self-assess their own indirect taxes. The activity statement will be treated as notice of assessment, issued on the day it has been lodge. You can lodge and pay electronically by mail or person. To avoid penalties which can be extensive  and interest you must lodge on time. Arrangements can be made to pay your tax debt over an extended period of time. If you’re a business, you can lodge your activity statements online or use a paper form. Lodging online is quicker and most quarterly lodgers get an extra two weeks to lodge (terms and conditions apply). As a business you use an activity statement to report and pay the GST your business has collected and claim GST credits. Most businesses report and pay their GST (Good and Services Tax) quarterly and have a choice each year about how they do this. GST is a value added tax of 10% on most goods and services transactions. GST is most levied on most transactions in the production process, but is refunded to all parties in the chain of production other than the final consumer. Generally, businesses registered for GST will include GST in the price of sales to their customers, and claim credits for the GST included in the price of their business purchases. You must register for GST if you run a business or other ‘enterprise’ and your GST turnover is $75,000 or more (for non-profit organisations the threshold is $150,000 or more). Taxi drivers must register for GST regardless of their turnover. As a business you use an activity statement to report and pay the GST your business has collected and claim GST credits. Most businesses report and pay their GST quarterly and have a choice each year about how they do this. If you are registered, the goods and services you sell in Australia are generally taxable under GST unless they are GST-free or input-taxed. If they are taxable, you include GST in the price. GST-free sales include most basic foods, some education courses and some medical, health and care products and services. As a GST-registered business, you need to issue tax invoices to your customers, collect GST and send it to ATO with your business activity statement (BAS). Written by Emelyn (Welcome aboard)

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