Frequently Asked Questions
Question 1 - Do I Have to Register for GST?
Goods and Services Tax (GST) is a tax of 10% in Australia on most goods, services, and other consumables. If you are a registered business, you need to charge GST on most goods and services you sell or supply. You must be a registered if your business turnover exceeds $75,000 per annum or $150,000 for a not-for-profit organization but you may elect for voluntary registration if you are below the threshold.
Likewise registered suppliers will include GST in the price of items you purchase from them for your business. You may be entitled to claim input tax credits from the ATO if you are registered for GST and the acquisitions are acquired for the purpose of carrying on your enterprise. Although the liability for paying GST rests with GST-registered entities, the end consumer bears the economic cost.
Some supplies will be GST free such as medical and educational services but you are still entitled to claim input tax credits for GST included in any purchases you made if you are a registered entity. For an input tax sale, such as providing residential rental accommodation, you do not charge GST on the sale of the goods or services to your customers and cannot claim input tax credits for the GST portion of your business expenses relating to the items acquired to make the supply.
The reporting periods for GST are called tax periods and can be quarterly or monthly. Quarterly tax periods are three months long, ending 30 September, 31 December, 31 March, and 30 June. Monthly tax periods end on the last day of each calendar month. Entities with an annual turnover of less than $20 million generally have quarterly tax periods, but can choose to have monthly tax periods. Entities with an annual turnover greater than $20 million are required to have monthly tax periods.
The rules for attributing GST payable and input tax credits to tax periods differ according to whether GST is accounted for on a cash or accrual basis. You can account for GST on a cash basis if you meet one of these requirements:
- Are not running a business, but are carrying on an enterprise with a GST turnover of $2 million or less.Account for income tax on a cash basis.
- Carry on an enterprise the commissioner has determined can account for GST on a cash basis regardless of your GST turnover.
- Are an endorsed charitable institution regardless of your GST turnover
- Are a trustee of an endorsed charitable fund, gift-deductible entity, or government school, regardless of your GST turnover.
If you are not registered for GST, you cannot include GST on anything you sell or provide. You also cannot claim back any GST included in the price you pay for goods or services used in your business.
Question 2 - What Tax Records Do I Need to Keep and for How Long?
As the burden of proof falls upon the taxpayer in event of any dispute it is imperative that adequate, well organised records are kept for the statutory periods as set out in the Income Tax Assessment Act. Generally, this is for 5 years from the end of the relevant records. There are penalties for not keeping records and it will reduce the risk of tax audit and adjustments if the records are kept and maintained for the required statutory period.
Statutory requirements are contained in Section 262A of the Income Tax Assessment Act 1936 (ITAA 1936) - and the requirements are that people (including companies) carrying on a business must keep adequate records that support and explain all transactions relevant to that Act.
In particular this would include:-
- All documents supporting amounts of income and expenditure
- All documents showing any estimates, elections, calculations or determinations relevant to the Act and showing basis for and methods used to arrive at an estimate, determination or calculation.
All records must be in plain English (or convertible to English) and be easily accessible and should be kept for 5 years. This would include records that are kept in paper or electronic form.
Records for Capital Gains Tax
Similar to the Income Tax Section 262A, the section 121-20 of the Income Tax Assessment Act 1997 (ITAA 1997) requires that taxpayers must keep records of all acts, transactions or events which could reasonably be expected to give rise to a Capital Gain or Loss through a Capital Gains Tax Event (refer Capital Gains Tax section). These events may have already happened or could be future events. These records must again show details of how the acts, transactions, events or circumstances are relevant in calculating whether a capital gain or loss has been made. These records must be held for 5 years after it is certain that no CGT event can or will happen.
Electronic versus Paper Records
Original records can be kept in paper format or electronically. However, all records must be secure and software should provide an audit trail so that entries cannot be easily altered. It must contain all the relevant information and can be maintained by the taxpayer or by someone else (eg. Your registered tax agent). Where paper records have been converted to electronic records they satisfy requirements if they are not altered once stored, kept for five years and can be retrieved and read at any time by Tax Office staff.
Q3 What are the Steps Involved in Starting a Business?
We are recognised as business start up specialists and can help you navigate your way through the business start up maze. We often say the start up phase is like a game of chess, to be successful you need to make the right opening moves. Basically the process usually includes:
- A fact find meeting to decide on the most suitable structure for your business. There are a number of options including sole trader, partnership, limited liability company or trust. The key considerations are income tax, asset protection, potential admission of new partners and eligibility for discount capital gains concessions.
- Preparation of a business plan including cash flow and profit projections including best and worst case scenarios.
- Assess your finance requirements and options and possibly prepare finance applications.
- Prepare a marketing plan and consider the business name, branding, slogan, website, SEO, domain names, social media strategy, digital publishing, target markets, site location and loads more!
- Register for an Australian Business Number, GST (if required) and Tax File Number with the Australian Taxation Office (ATO). If you plan to employ staff there are additional registrations including WorkCover and PAYG.
- Other registrations may include your business name and domain name(s).
- Legal Issues including trademarks, wills, leases, trading terms and specific industry registrations like council permits, liquor licensing, building approvals etc.
- Software selection is critical because the wrong choice can prove very costly. We aim to help our clients minimise the cost of compliance and we recommend software that matches your business needs with your level of accounting skill. In many cases we train you to use the software. There are a multitude of options including MYOB, Cashflow Manager and cloud based solutions like Xero. We urge you to consult with us before you make this important decision.
Download our starting a business expense checklist from here
This is really just the tip of the iceberg and we have even written a 45 page booklet to help our clients starting out in business. Copies are available from our office or call us on 1300 789 844.
Q4 How Much Do You Charge?
Our fees are generally based on the time taken to complete the task and the level of expertise required.
While we do offer fixed price agreements for a standard package of services our time is charged at hourly rates. These rates vary with the various staff levels and the degree of experience required to provide a professional service without compromising quality.
Please feel free to contact our office to discuss our pricing and our clients keep telling us we provide exceptional value.