Key considerations when starting a business.
Ok, ready to take the plunge? Branch out and start doing what you love on your own terms?
Here’s what you need to know:
Choosing the right entity structure to start off with
Registering for an ABN
Registering for and understanding GST
Choosing appropriate accounting software
Understanding your BAS reporting and superannuation obligations
Record keeping
1. Choosing the right entity structure
This is possibly the most crucial decision you'll make, as it affects how much tax you’ll pay, how secure your personal assets are, and the level of paperwork and compliance you'll have to deal with.
I've written a blog on the different types of entities available – feel free to check it out [insert link], as it’ll help you better understand what I’m about to say next.
It’s always better to be overprepared when it comes to choosing a structure, but at the same time, you don’t want to overburden yourself with compliance.
For example, Sole Traders – the most common starting point for small businesses – are fully liable to creditors. If you get sued, your personal assets may be at risk. That said, it’s not a bad structure overall – it's light on compliance, and rollover relief is available for Capital Gains Tax if you choose to move your business into a wholly owned company down the track. Just keep in mind that transfer duty might still apply depending on your state.
This is just one example of the complexities that can come up.
2. Registering for an ABN
This is a relatively straightforward process and is compulsory if your entity is a trading business. The steps and requirements vary slightly depending on your chosen structure.
3. Registering for and understanding GST
You’re required to register for GST when your aggregated turnover exceeds $75,000 in a financial year. In simple terms, if you're consistently earning more than $1,500 a week, it's time to register.
Understanding how GST applies to your business can take time – for example, some items like financial supplies or certain food items may be GST-free.
You’ll also need to decide whether you’ll report GST on a cash basis or accrual basis, depending on what suits your business best.
4. Choosing appropriate accounting software
There are a few key factors when choosing accounting software: affordability, ease of use, and reporting functionality.
For most small to medium businesses (under 100 employees), I recommend Xero. It’s user-friendly, has strong reporting features, and can save you countless hours on bookkeeping. The only downside is its cost – it’s the market leader, so naturally, it comes with a higher price tag. But it’s at the top for a reason.
If you’re looking for alternatives, Reckon, MYOB, and Intuit (QuickBooks) are still solid options.
If you're running a larger organisation (100+ employees) and need multiple users accessing the software simultaneously, you’ll likely need an enterprise solution. These systems are more complex to implement and require training, but there are dedicated teams that can assist with setup and ongoing support.
5. Understanding your BAS reporting and super obligations
Your Business Activity Statement (BAS) and superannuation obligations depend on your turnover.
Most businesses lodge a quarterly BAS, which is due on the 28th of the month following the end of each quarter. If you're lodging through a tax agent, they typically receive a one-month extension.
Super is similar – if paying quarterly, it's due by the 28th of the following month. Depending on your turnover, you may also be required (or choose) to lodge and pay monthly.
6. Record keeping
So, how are you going to file all those receipts and invoices?
Please don’t say you’re going to shove them in a shoebox and wait for the end of the year. That’s every accountant’s nightmare!
It’s important to have a structured filing system – whether electronic or paper-based – so you’re organised and compliant from the get-go.
Disclaimer: The information in this blog is general in nature and is not intended as advice.