There are a staggering number of laws and regulations that businesses in Australia must comply with. Here are the main laws and regulations applicable to Australian businesses. Please note that this is not an exhaustive list.
- Business Registration and taxation laws
- Fair Trading Laws – Fair Trading Laws include Australian Consumer Law, Competition and Consumer Act, Australian Standards, codes of practice.
- When selling products and services a business needs to comply with trade measurement laws, pricing regulations, product labelling, warranties and refunds
- Contract laws
- Businesses collecting and storing customers’ personal information should comply with privacy laws.
- A business which employs people needs to comply with anti-bullying laws, the Small Business Fair Dismissal Code, Fair Work Ombudsman, worker compensation insurance
- Environmental protection laws
- Legal obligations of marketing
Despite a long list of regulations it is relatively easier to start and operate a business in Australia compared to other comparable countries. As a small business owner first step in being legally compliant is to be aware of the rules and regulations that apply to your business. You can consult a legal professional for advice on what you must comply with.
In this post we are outlining the main registration and ATO requirements applicable to small businesses, again this is not an exhaustive list.
Simplest form of business registration is to register as a sole trader. If you are starting a business you need an Australian Business Number (ABN). You can apply ABN as a sole trader, which is the cheapest option with lowest compliance requirements. All the requirements that I have listed in this article relate to sole trading business. I have not covered any additional requirements for other forms of business such as companies, partnerships and trusts.
At this stage you need to decide whether you want to register for Goods and Services Tax (GST) as well. If you expect your annual turnover to be more than $75,000 you need to register for GST. There are some businesses for which GST registration is compulsory, for example business of providing taxi service.
You can also voluntarily register for GST even you don’t expect your annual turnover to exceed $75,000 and you are not required by law to have GST registration.
If you register for GST you need to add 10% on all your sales (excluding some GST free sales). The 10% extra charged to your clients belongs to the Government. However, you can deduct any GST that you have paid on business related purchases and pay the net amount to the Government.
Have a separate bank account for your business
A separate bank account tremendously helps to separate your personal dealings from your business transactions. This will save a lot of your time at the time of your BAS and tax return.
Keep all receipts and invoices of all business related expenses. Some dockets fade out, so keep scanned or photocopy of such dockets. Also keep record of invoices you issue to your clients. You need to keep these records for 7 years from the end of financial year.
Pay as you go (PAYG) withholding
If you employ people and pay salary you must withhold tax from the salary. Your business needs to register for PAYG withholding. PAYG is also deducted from payments to other businesses that don’t quote their ABN number.
You must register for PAYG withholding before withhold an amount from a payment.
ATO website has a PAYG withholding calculator which can be used to workout PAYG withholding amount.
A business with employees will also have to obtain adequate workers’ compensation insurance.
Pay as you go (PAYG) instalments
When someone works as an employee tax is deducted from salary and usually there is no big tax payable amount at the time of lodgement of tax return. However, if you work as a sole trader there will be no PAYG withholding and if you don’t make regular payment towards your expected annual tax liability there will a big amount payable at the end of the year and you might not have sufficient cash to pay off your tax liability. Pay as you go (PAYG) instalments is a system to address this issue by making regular payments towards expected end of year income tax liability of a business.
Generally, if a business pays $450 or more before tax in a calendar month to an employee, super needs to be paid on top of the wages.
- Super guarantee (SG) payment is the minimum super payment which is currently 9.5% of an employee’s ordinary time earnings.
- SG is paid at least four times a year, by the quarterly due dates.
- Super must be paid and reported electronically in a standard format, ensuring SuperStream requirements.
- Super payments must go to a complying super fund – most employees can choose their own fund.
If SG is not paid on time, a business may have to pay the super guarantee charge.
Lodge Business Activity Statement (BAS)
A business registered with GST will have to lodge a business activity statement.
Your BAS will help a business to report and pay:
- goods and services tax (GST)
- pay as you go (PAYG) instalments
- PAYG withholding tax
- other taxes.
When a business is registered for an Australian business number (ABN) and GST, ATO will automatically send a BAS when it is time to lodge.