Everything You Need to Know to Start a Business in Australia
All human beings are passionate about something in life. While some are obsessed with sports, others want to pursue a career in music or theatre. There are a variety of professions waiting for enthusiastic and creative individuals who want to make a mark in their respective fields. Also, there are people who dream of making it big by setting up their own venture, a business that gives wings to their imagination. It is an endeavour which brings the entrepreneur’s vision to life and operates on his principles and goals. That is why starting a business means a lot to those who wish to grow on their own, and take the road less travelled to reach their destination. The dream is often realised by entrepreneurs by setting up a new venture or through the acquisition of a business for sale in Australia. However, you need to prepare in advance before you enter the dynamic Australian market that boasted of $1,421,809 million GDP in 2017, which grew by 2.3% from the previous year. The country stands at the 12th position among 196 countries in the GDP rankings and offers a high standard of living.
There is no denying the fact that the nation is a hub of commercial activity and a plethora of investors keep adding a variety of businesses to its growing economy every year. During the fiscal year 2016-17, a staggering number of 2,238,299 businesses were actively trading in the country which was up by 3.1% from 2015-16. All the states witnessed an increase in the number of operational ventures in 2016-17 with the largest jump of 4.5% seen in the Australian Capital Territory. So, if you are longing to carve a niche for yourself in the market, you need to make certain that you are equipped to operate a business legally with all the requisite registrations, licences and permits. It ensures that the enterprise is not forced to close down because of non-compliance with the law.
Australian Business Registration
Once you have decided to set up a business or acquire an existing business for sale in Australia, begin by finalising the structure of the organisation. The four major types of small businesses in the country are a partnership, a sole proprietorship, a company and a trust. A corporation is called a partnership when two or more people come together to form and operate an organisation, while a sole trading venture is launched by an individual who is legally responsible for all the functions of the business. The sole trader can hire employees to run the enterprise. On the other hand, a company is a legal unit which is separate from its shareholders, while a trust is an entity that retains possessions or earnings for the advantage of others. The structure of the organisation determines the amount of tax to be paid, the licences required, clarity of ownership and prospective liabilities. This is a flexible aspect, and the structure can be changed at any time in the lifespan of the business.
If you are planning on purchasing a franchise for sale in Australia, then you need to enter into a franchise agreement with the franchisor. As a franchisee, you would be legally obligated to operate as per the policies mentioned in the agreement and the operating manual. You will also have to adhere to the Franchising Code Of Conduct. A franchise can function as any of the four business structures mentioned above which help to define the taxes to be paid. Once the structure is finalised, the next step is to apply for the Australian Business Number (ABN) which is an 11-digit unique figure that gets your venture recognised by the government and the community where it exists. The ABN is essential while you are ordering supplies and generating invoices for clients. It helps you to avoid the Pay As You Go (PAYG) tax and demand Goods and Services Tax (GST) as well as energy grants credits. You can quickly get an ABN online by visiting – register.business.gov.au
You also need to register the name of your organisation with the Australian Securities and Investment Commission (ASIC) which allows you to run the enterprise in any state or territory. However, if the name under which you will be trading is your own name or your partner’s name, then you are not required to get it registered. Naming is quite significant as it gives an identity to your business and develops brand equity in the market. It also helps to distinguish your products and services from those of the competition. The business name can be registered online from the same government website mentioned above. The cost of registration is $35 for one year and $82 for three years. It takes approximately 12 minutes to complete the process online and the confirmation is received in 2-5 business days. An important thing to note here is that registration does not provide you the exclusive ownership to use the name; instead you need a trade mark for this purpose.
Trade Marks in Australia
A trade mark is an identifiable name, sign, word, number, characteristic, sound, logo, smell, phrase, shape, picture, or the way of packaging that distinguishes a product or service from its competitors. It legally protects your brand name and its features so that it cannot be copied or used by anyone else. As per the Trade Marks Act of 1995, you legally get the exclusive right to make use of the registered trade mark, sell it or licence it in the country. It is quite easy to apply for a trade mark online. The TM Headstart portal offers an evaluation of the application and provides a response within five days. Through this process you can speak to the examiner and alter the application before filing for the trade mark.
There is a standard online process available on the same website which is cheaper but does not provide a pre-assessment. Through this other link you get the filing date straight away. In order to make sure that the trade mark you are applying for has not been already registered or is in the process of getting registered by someone else, you can visit https://search.ipaustralia.gov.au/trademarks/search/quick. After the filing of the application, it takes around 3-4 months for assessment. If it gets acknowledged, the trade mark is published in the Australian Official Journal of Trade Marks as accepted. This gives a chance to people who want to challenge this trade mark to oppose it before the registration. If there is no opposition or the resistance is tackled by the applicant, then the trade mark gets registered.
The trade mark needs to be renewed after 10 years by paying a renewal fee. It will be protected in all the states and territories of Australia, however, for international use; you will have to register it with individual nations. Also, you must use the trade mark; otherwise it can be used by someone else if it remains unused for over three years.
What type of business do you wish to start in Australia?
Next, you need to register for the taxes that are applicable to your type and size of business. Some taxes are mandatory for all the ventures while others are optional. All the businesses are required to get a Tax File Number (TFN). A sole trader can use his individual TFN, while a company, trust and partnership need to have an additional TFN for their business entity. Also, it is recommended that one must get the Australian Business Number (ABN), though it is not mandatory. This is because it is easier to register for some taxes if you have the ABN. For example, if you have to apply for Goods and Services Tax (GST), then ABN is a pre-requisite.
If you own a company, then you would require the Australian Company Number (ACN) which is given by the Australian Securities & Investments Commission (ASIC). Make sure to get the ACN before applying for the ABN. At times, owners change the structure of their organisation from a sole trader or partnership to a company. In such a scenario, you will have to ensure that you have complied with all the activity, tax and reports obligations towards the government. After meeting this requirement, you will have to cancel the current ABN and get registered as a company and get the ACN. Then you can apply for a new ABN.
Good and Services Tax
Almost all the businesses are selling some kind of goods and services. Thus they all are required to register for the Goods and Services Tax (GST). This tax is obligatory for those enterprises which have a GST turnover of $75,000 or above as well as those non-profit entities which have an annual turnover of $150,000 or above. It is also compulsory for taxi owners providing taxi travel to passengers for a fee and those who rent out a taxi to offer the same service. GST is mandatory for overseas businesses importing services and digital products and making a profit of A $75,000 or above.
Most businesses employ other people and have to pay salaries or wages; such organisations have to register for Pay As You Go (PAYG) Withholding as you will have to withhold some amount from the payment as taxes. This is also required in case you have to make payment to another business which hasn’t given its ABN to you.
The Payroll Tax is levied by every state and territory government on the monthly wages paid to the employees working in those states and territories. If the monthly wage bill of a business is more than the threshold set by the locations where it is operating, then it will have to register for the Payroll Tax. For example, if your employees are placed in Victoria which has a set threshold of $52,084 and your bill is $50,234 then you do not need to register. On the other hand, if your wages bill is $54,098, then you will have to register for the Payroll Tax.
Fringe Benefits Tax
This is required if the owner decides to give perks or extra benefits to the employees such as a company car, low-cost or free parking, low-interest loans, payment of personal expenses as a component of the salary, etc.
There are many other taxes that you will have to pay depending on the type of your business, such as income tax, land tax, capital gains tax, excise duty, stamp duty, international tax, etc.
The registration for these taxes is pretty simple and can be easily done online via https://register.business.gov.au/. This registration is open for all kinds of new ventures and existing businesses which have an ABN. This is a safe, swift and effortless way to complete the task as the Australian Taxation Office (ATO) makes the process very user-friendly. The privacy part is taken care of by the AUSkey which helps you to access these services with complete security. The payment can be made through a credit or debit card as well as through BPAY. There is also the option of mailing payments or using the Australian Post Office payments
Licences and Permits
Besides the taxes, there are certain licences and permits which are essential to run specific types of businesses. Some of these include a licence to operate from the state or local government if your business activity can affect the environment or a zoning licence if you plan to work from home, etc. There is an online tool Australian Business Licence and Information Service (ABLIS) which helps to find the licences and permits related to different types of businesses. The tool provides a comprehensive report on licences required, their fee, application process, timeframe and renewal.
Endnote: Thus whether you are planning to set up a new business or wish to purchase an existing business for sale, you must know about the registration process and complete the paperwork with all the registrations and licences in place to operate without any difficulties.
© 2018 Nitish Khanna