Meeting your business compliance requirements is critical to every business, no matter the size or type of enterprise.
If you don’t establish the correct legal, accounting and tax compliant business foundations from the get-go, your business could run into risky legal and financial trouble down the line, which may cause significant disruption to your business’ success.
Our business compliance guide will help you and your business get off to the right start and stay on track.
Choose the best legal structure for your business
There are two key choices when deciding on the legal structure of your business:
- Incorporated (a limited company). This treats the business owner and the business as separate legal entities.
- Unincorporated (sole trader or partnership). This combines the business owner/s and business into one legal entity.
Most business owners will opt for the incorporated limited company structure as this keeps personal and business finances separate, this lowering personal liability and risk.
Set up your business bank accounts
To trade both legally and efficiently in your business, you need to establish a business bank account that is used solely for business transactions. This creates a distinct divide between the money you’ve generated from the business, and your own personal spending.
As most banks won’t allow you to use a personal account for business purposes, they will offer a variety of different business accounts, with varying levels of fees, overdrafts, credit facilities and other business features that may be useful.
Keeping your business finances consolidated is especially important when it comes to generating accurate management accounting reports and legally compliant EOFY tax returns.
Set up your bookkeeping and accounting system
It’s a legal requirement for your company to keep adequate records and to submit annual statutory accounts. To be able to meet these requirements, it’s essential that you establish bookkeeping processes and a reliable accounting system in place.
There’s a great range of various cloud-based accounting platforms designed for those new to business or established small to medium businesses such as:
These programs are user-friendly and help keep your accounting processes streamlined, efficient and straightforward.
Be sure to engage the services of a qualified bookkeeper who is also a registered BAS Agent as well as qualified tax accountant right from the beginning. These two professionals will ensure you keep up to date with all your compliance needs, and get the best possible accounting advice, tailored specifically to your business.
Register for the relevant business taxes
All businesses must register for the relevant business taxes associated with their business type and prepare early on for a percentage of business profits to be paid at the end of each financial year.
If you are established as a company, you must register for corporation tax in your state or territory. Corporation tax is paid based on a percentage of your year-end profits, once reliefs and other allowances have been considered.
As a general rule, approximately a quarter of your year-end profits will be paid as tax so it’s imperative to set aside money, preferably in a separate tax account, to ensure you’re never caught short in meeting your tax obligations.
Other taxes you need to register for:
Self-assessment income tax. Although a business owner pays corporation tax on company profits, directors are also taxed on their own personal earnings too. If you’re an unincorporated sole trader, you’ll be taxed on your business profits as personal and business income are treated in the same manner.
Goods & Services Tax (GST). GST is an indirect value-added tax or consumption tax for goods and services. If you sell products or services that qualify for GST, you’re responsible for collecting these taxes and paying them to the ATO on a monthly, quarterly, or annual basis. The threshold for mandatory BAS/GST registration is an annual turnover of $75,000 or more (Not for Profit organisations threshold is $150,000).
Pay-As-You-Earn (PAYE) / Pay-As-You-Go (PAYG). If you have employees, and your state or territory operates a PAYE/PAYG system, you’ll need to make income tax deductions from your employees’ wages and pay these taxes directly to the ATO. This is done as part of your regular payroll processing.
Payroll Tax
Payroll tax is a state-based tax assessed on the total wages (including superannuation) paid to your businesses staff. Each Australian state has a separate threshold and rate. Registration for payroll tax is mandatory for a business once the state threshold is reached. Payroll tax can be quite complex especially if you have employees working across multiple states or territories.
Licences and permits
Depending on your business, you may need some business licences, registrations or permits which can differ from state to state, and industry to industry.
Check with the relevant authority in your state to find out exactly what licences and permits you need to keep compliant.
Use a small business compliance checklist
To ensure you don’t skip over any important aspects, the Australian Government Business site has a start-up checklist along with companion checklists for all the state and territory government agencies that you can refer to for a comprehensive rundown of your obligations.
Making sure your business remains legally compliant at every stage can be an overwhelming process. By following the above steps and working closely with your bookkeeper and accountant, your business will be up and running on the right track in no time.
Need help with your business setup and compliance obligations?
Connect with Numble today and we’ll help you get started.
