Doing Business in Australia: What you wish your accountant told you!
Jul 12, 2024
By Sarah Pyke
Since COVID, we have seen a boom in people starting up their own businesses, particularly women. Whether selling a service or a product, as a sole trader or a company, there are lots of things to consider when venturing out on your own.
In this blog we will run through some core things to consider when setting up your business and provide some simple and practical advice for first time business owners. Lets’ go!
Where to start? ✅
First things first, how are you going to conduct your business? Do you wish to create a company to operate out of, or start off as a sole trader. Maybe a trust? What’s a sole trader? 👩💼
There are a few options to consider in this very first step, but don’t get swept away with what you can find on google, or what friends tell you at the pub. Keep. It. Simple.
Structure is sexy, when it’s simple! ✨
Structure for your business over the long term will be extremely important. However, as you take off in to the world of business, you don’t need to set up complex and expensive structures from the get go. Here are your main options:
- Operate as a sole trader
- Operate as a Pty Ltd company
Why operate as a sole trader?
The simplest form of structure is a sole trader. Essentially you trade in your own name (or a business name) with a personal ABN.
- There is no separate legal entity. The business is you, you are the business.
- You pay tax on your income at your marginal tax rate. You do no not need to do a separate tax return.
- There’s no cost to setup or apply for the ABN. Therefore, this is a great way to initially setup your business.
Why operate as a Pty Ltd company?
A company would be the most common business structure.
- It is a separate legal entity, which means that if the company is sued by a customer, the customer is suing the company and not you (as owner and Director).
- They have a reduced tax rate of 25% compared to personal marginal tax rates.
- The company has it’s own tax return, separate from your personal return.
- The setup cost of a company does need to be considered, along with the annual running costs for tax compliance and maintenance. It is 3 – 4 times more expensive than operating as a sole trader.
- Does create other costs – such as workers compensation insurance. This is mandatory for Pty Ltd companies.
Why not consider other structures?
You don’t need a fancy three-part structure with a company, trust and corporate trustee (there’s dozen’s of combos). Some entities are also not ideal for running a business.
Keep. It. Simple. Keep the cost down and look to add to/or change your structure as the company grows and expands.
GST or not to GST, that is the question! 💭
Under Australian tax law, you do not need to be registered for Goods and Services Tax (GST) unless you make over $75,000 per financial year. This applies to anyone/company that holds an ABN.
Therefore, initially you may decide not to register for GST. However, the choice is yours until you reach the $75,000 mark.
Once you do register for GST, you will have to prepare and lodge Business Activity Statements with the Australian Taxation Office (ATO) every quarter – July, October, January and April.
Software will save you hours ⏱️
Xero, MYOB, Quickbooks. Accounting software may not be anyone’s idea of a good time and you might want to try to save the money and use trusty old Excel. But we can assure you, you will live to regret it.
Accounting software is reasonably priced and has the ability, if used correctly, to save you hours and hours of your precious time.
Also for the purposes of paying wages either to yourself or your staff, you must use accounting software. This is due to the ATO’s Single Touch Payroll requirements which mean the ATO can track your payroll processing with live feeds between your software and the ATO.
Delegate the rest to the best ⭐
You don’t cut your own hair, you don’t service your own car. We delegate these things to experts, to people who provide these services for a living. Your business’s bookkeeping and accounting needs are no different.
We try to do it all. Try to wear all the hats and financially this may be the only choice we have. However, your business’s success and financial future is totally dependent on ensuring your income and expenses are managed and monitored effectively and efficiently.
For any new business owner, we therefore recommend you engage with an accountant immediately. They can assist with setting up your Pty Ltd company, as well as applying for your ABN. They will also be your sounding board and biggest advocate as you navigate the business world and any questions you have in your business’s early years should be directed at your accountant.
A bookkeeper is also a very sound investment. They will ensure your business accounts and records are kept up to date monthly and keep a close eye on your bank account and cashflow. You can find accountants, like Bond Financial, that provide both tax and bookkeeping services.
Repetition makes perfect 💯
Business is built on repetition. Quarterly ATO filings, monthly bookkeeping, daily invoices.
Although the above may seem daunting at first, once you find a rhythm, with the right processes, software and team around you, you’ll never look back!
If in doubt, let’s talk it out! 👩💻
If you need any assistance or just want to chat further about any of the above content, please reach out to me Sarah Pyke from Bond Financial via the details below:
+61 403 931 098 | [email protected] | www.bondfinancial.com.au
