Tax Return:: Starting your own Company in Australia

Hello this is P&C Tax Professionals, a specialist in all things related to tax and super.

Recently, it seems like many people are interested in starting up their own business here in Australia.

Therefore today, we will discuss about some of the key points to consider when it comes to setting up your own business.

1. Let's review the feasibility of the business!

Before you jump right into beginning your business, first of all, you should review the feasibility of the business you are planning to undertake.

Unless you are focusing on conducting an online business, one of the most important factor to consider when establishing your corporation is the "location" in which you will carry out your business operations. Similar to the purchasing of a property, running a business is also "all about location". This is because location can have a direct influence on your sales in the future Therefore, it is very important to select an ideal location after carefully examining what kind of business you are willing to take on and who your main target is.

Before deciding on a suitable location, in terms of analysing the feasibility of the location, it is highly recommended to also thoroughly investigate the floating population of the area and the surrounding environment by consulting a nearby real estate, browsing the web or simply by making direct visits to the site in person.

As usual, the better the location is, the greater the investment is needed so it is important to start your business by selecting the best location that is within the limit of the budget you have set for your company.

In the case of investment (capital) in Australia, there is no limit on the minimum investment amount, but it is very important to formulate a strategic budget based on your own market research and judgement during the review stage of starting your own business.

2. Let's think about the "quality of our goods and services"!

The next thing to consider is the "quality of our goods and services".

For example, even if a restaurant has managed to secure a suitable location through sufficient review, if the quality of the food and the service is of a poor nature, it will no doubt pose a huge threat in securing customers and consequently maintaining a stable sales figure.

In marketing, employees are commonly referred to as "internal customers" and internal customer satisfaction is viewed as one of the cornerstones for maximising external customer satisfaction.

In conclusion, when starting a new business, the feasibility study should be based on the three factors of production in the macro economy: land (including location), labour and capital to produce the goods and to deliver the services.

It is recommended that you consult with your accountant or attorney for any tax accounting or legal issues that may arise in the future during the planning process.

3. Opening your Company

After deciding on the aforementioned factors and reviewing the feasibility of the business, the first thing you need to do before you start running your business is to register your business. Once you officially register your company, you will then receive a tax file number, an ABN and an ACN for your company. You must then also register for GST (Goods and Services Tax) and PAYG (Employee Withholding Tax).

If you are running a small business, you generally need to:

- Report your GST and PAYG every quarter

- Lodge an annual income tax return once during the year

If you are running a food business or a business that does not require an extensive amount of investment (e.g. cleaning, human resources office, etc.), the amount of GST that is payable will be relatively higher. Hence, you should always assume that 9.1% of the company's sales are to be paid to the ATO as GST and as a result, you should set your budget accordingly in line with this rule of thumb.

Let us explain the Australian GST payment to further clarify your understanding:

Sales: $11,000 (including GST $1,000).

Purchases: $5,500 (including GST $500).

Generally in this case, you must report and pay $500 (sales GST $1,000 - purchase GST $500) each quarter. The reason why restaurants pay a lot of GST is because there is no GST for primary products (such as meat, vegetables, milk, eggs, etc.) at the time of purchase. This is why the service industry also pays a lot of GST because the purchase rate is likely to be lower than that of other businesses.

4. Opening an Australian company account

After you complete the opening of your company, the next step is to set up a bank account for the company.

Here, all investments made by the owner should be put into the company's bank account and all other expenses that are incurred as a result of running the business including your day-to-day business transactions and legal fees should also be paid out through the same corporate account.

In addition, transactions that are for personal purposes and transactions for corporate purposes must be clearly separated at all times. For example, you should not use the company's card to pay for personal meals with acquaintances. On other hand, it is perfectly fine to use the corporate card for business-related expenses (such as booking for hotels and flight tickets for business trips, etc.). However, even during business trips, you must never use the card to pay for your personal expenses. Of course, when it comes to purchasing materials or renting a store, you should always use your corporate bank account.

5. Consult with an attorney

Once the market research, business feasibility study, corporate setup, and account planning are all completed, you should consult with an attorney regarding the sale of the business and the rental contract.

If you are already running a business, you should consult with your attorney for matters relating to mandatory licences (e.g. alcoholic licences, etc.) and insurance. It is absolutely crucial to only sign a business sale contract or a rental contract after receiving sufficient review and advice from an experienced attorney.

6. Starting your company

Finally, if all of the above steps are completed, you are now ready to start your own business!

When you initially start a business, your business may thrive or it may face a crisis due to a number of both internal or external factors.

In order to successfully respond to unexpected risks that may occur, it is always a good idea to craft a long-term business strategy which you can then use to devise up a short-term business plan for your company.

If you have any further questions or enquires in terms of setting up a company or running a business in Australia, please do not hesitate to contact us through our Official Facebook Page (P&C Tax Professionals - Australia) or email us your questions to pnctax@naver.com.

Thank you and bye for now:)