Starting a new business is both a challenging and exciting endeavour. It also comes with a unique set of tax considerations (not so exciting). The Australian tax system can be complex, and it's essential for startup founders to understand the laws and regulations that apply to their venture. Here’s an overview of the key tax laws and regulations (direct from a startup lawyer) that startups in Australia need to know about.
Get to Know Your ABNs and GST
Most business owners will know that one of the first things to sort out when starting a business is obtaining an Australian Business Number (ABN), and registering for Goods and Services Tax (GST) where required. An ABN is a unique 11-digit number that identifies your business to the government and is required for many business transactions. GST applies to supplies of most goods and services in Australia. It's the responsibility of the supplier to charge and remit GST to the Australian Taxation Office (ATO). Startups, like all businesses, are required to register for GST if their turnover is above a certain threshold (currently $75,000 per year, or $150,000 for non-profits).
Consider How to Structure Your Startup
Another important commercial and tax consideration for founders relates to choosing the right structure for your startup. There are several business structures to choose from, including sole trader, partnership, trust, and company. Each structure has its own commercial and tax implications, and it's essential to choose the right one for your business. For example, a trading company has a flat tax rate of 25%, but is not eligible for the general 50% CGT discount.
Want to learn more about startup structures? Our startup accountants and startup lawyers have shared the pro’s and con’s of structuring a startup as a company vs a trust .
Discover Tax Incentives and Concessions
Startups should take advantage of the various tax incentives and concessions offered to new businesses. For example, the Australian Government offers a range of tax incentives, such as the R&D Tax Incentive and granting your company Early Stage Investment Company (ESIC) status , a tax incentive with massive benefits for your investors. Additionally, there are also various tax concessions available for small businesses, such as the instant asset write-off and the small business tax offset.
Hiring and Retaining Employees
Securing top talent is hard enough. Once you’ve got a great team on board, implementing an employee share scheme (ESS) or employee stock option plan (ESOP) is a great way to keep them. These initiatives allow startups to be competitive in the employment market without spending too much precious cash on wages. But, founders (and their employees) should be aware of the tax implications of employee share schemes .
Like any business that employs people, startups are responsible for complying with Australia’s various tax and superannuation laws . This includes deducting and remitting Pay As You Go (PAYG) Withholding from payments to employees, as well as making superannuation contributions on behalf of employees. Founders should also be aware of the various employment laws and regulations that apply, such as the Fair Work Act and the National Employment Standards.
Seek Specialist Startup Advice
Seeking professional advice from a startup lawyer and startup tax accountant can help founders navigate the complexities of Australia’s tax system and employment laws. If you’re just getting started on your startup adventure, check out our Guide to Startups where we cover off what to do with your seed funding to set yourself up for success. And if you’re ready to scale things up, learn more about how BlueRock helps startups thrive .
