10 Tips for First-Time Business Owners 

LinkedIn
Facebook

Starting a business in Australia is an exciting venture but can be overwhelming for first-time business owners.  Understanding the tax system and applying strategic approaches can reduce your tax liability and assist with Australian Taxation Office (ATO) compliance.

Here are some essential tips for first-time business owners:

  1. Choose the Right Business Structure

The structure of your business whether it be as a sole trader, partnership, company, or trust can have a significant impact on your tax liabilities. Companies can benefit from a lower tax rate, currently 25% for base rate small business entities.  While trusts allow income splitting among beneficiaries to reduce taxable income. Please consult us to determine the best structure for your goals and business.

  1. Register for Australian Business Number (ABN)

Obtain an Australian Business Number (ABN) which is essential for invoicing and claiming GST credits.  We can assist you with the ABN registration or you can register for an ABN through the Australian Business Register (ABR) website.

  1. Understand GST Requirements

If your annual turnover exceeds $75,000 you are required to register for Goods and Services Tax (GST).  Once registered you will be required to lodge regular Business Activity Statements (BAS).

  1. Set up a Business Bank account

Mixing personal and business expenses complicates tax reporting and may lead to missed deductions. To avoid this, we recommend opening a dedicated business bank account and as well as using separate business credit cards to simplify record-keeping to ensure compliance. 

  1. Employing Staff – PAYG and Superannuation Obligations

If you are planning to employ staff or contractors, you may need to withhold tax under the PAYG withholding system.  The business will need to register for PAYG withholding with the ATO.  The business will also be required to contribute to their superannuation and ensure timely payments to avoid penalties.

  1. Invest in Tax Software

Good accounting software, such as Xero or MYOB, assists with GST and employee reporting compliance, as well as tax calculations and BAS submissions. It also reduces errors and ensures you claim all eligible deductions.

  1. Maximise Deductions

You can claim immediate deductions for certain expenses incurred before your business starts operating such as;

  • Professional advice (eg. legal or accounting services)
  • Business registration costs
  • Market research and feasibility studies.
  • Business premises set up costs.

Once the business commences be diligent in claiming all eligible deductions. Don’t overlook less obvious deductions such as home office expenses.   Ensure that you maintain accurate and organised records for all expenses, invoices and receipts.

  1. Instant Asset Write-Offs

The ATO allows small businesses to immediately deduct the cost of eligible assets under the instant asset write-off tax incentive.  This can apply to vehicles, machinery, and office equipment.  The threshold is $20,000, exclusive of GST if registered for GST, and applies to small businesses with an aggregated turnover of less than $10 million.    The asset must be first used or installed ready for use for a taxable purpose.  Currently the $20,000 threshold only applies until 30 June 2025.  After 30 June 2025 the threshold is scheduled to revert to $1,000.

If the asset exceeds the $20,000 threshold it cannot be immediately written off however it will be added to a general small business depreciation pool and depreciated at 15% in the first year and 30% in subsequent years.

  1. Take Advantage of Tax Concessions for Small Businesses

Small businesses in Australia can benefit from tax concessions such as the following:

  • The small business income tax offset (up to $1,000 per year). This applies to sole traders and individuals receiving business income from trusts.
  • Simplified depreciation rules, including pooling of assets and instant asset write off.
  • Option to account for GST on a cash basis and report GST quarterly.
  • Immediate deductions for prepaid business expenses.
  • Capital Gain Tax Concessions, which will reduce capital gains tax when selling assets.
  1. Pay Taxes on Time to Avoid Penalties

Late tax payments can result in penalties and interest charges.  We advise you to set up reminders for important dates like Business Activity Statement (BAS) lodgements, employee super guarantee and income tax payments to avoid unnecessary charges. 

 

Please do not hesitate to contact a Hall Chadwick QLD advisor before commencing with setting up a new business so that we can advise you on the most suitable business structure and ensure you understand and meet your tax obligations.

If required, we can also assist with helping you set up efficient bookkeeping and account systems.

Subscribe to our Newsletter