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.
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