Tax Tips for Startups: What Every New Business Owner Should Know

1. Choose the Right Business Structure The choice of legal structure is fundamental to your tax obligations. The main options in Australia are:

   • Sole Trader: Tax is paid at individual income tax rates, and you claim business deductions in your personal return.

   • Partnership: Partners are taxed on their share of the net income at individual income tax rates.

   • Company: A separate legal entity taxed at the corporate tax rate.

     • For the 2024-2025 income year, the corporate tax rate is 25% for a 'Base Rate Entity' (BRE) with an aggregated turnover of less than $50 million and 80% or less passive income.

     • The full corporate tax rate is 30% for all other companies.

   • Trust: Allows for income distribution to beneficiaries, which can be a tax planning tool, but is structurally complex.

2. Register for an ABN and TFN You must register for an Australian Business Number (ABN) and a Tax File Number (TFN). The ABN is vital for invoicing, claiming Goods and Services Tax (GST) credits, and avoiding Pay As You Go (PAYG) withholding tax from others.

3. Understand Your GST Obligations

   • You must register for the Goods and Services Tax (GST) if your business has a GST turnover of $75,000 or more ($150,000 for non-profit organisations).

   • You must also register if you provide taxi or limousine travel (including ride-sourcing), regardless of your turnover.

   • Once registered, you charge 10% GST on sales and must lodge regular Business Activity Statements (BAS) to report and pay the net GST (GST on sales minus GST on purchases/expenses).

   • You may choose to register voluntarily if your turnover is below the threshold, allowing you to claim GST credits on business purchases.

4. Keep Accurate Records The Australian Taxation Office (ATO) requires you to keep records for at least five years. This includes all records of income, expenses, tax invoices, receipts, BAS, and tax returns. Accounting software is highly recommended for efficient and accurate record-keeping.

5. Claim All Eligible Deductions You can claim deductions for most expenses directly related to earning your business's assessable income.

   • Common Deductions: Rent, office supplies, vehicle expenses, marketing, advertising, and professional fees.

   • Instant Asset Write-Off: For the 2024-2025 financial year, businesses with an aggregated turnover of less than $10 million can immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Assets valued at $20,000 or more can be placed in the small business simplified depreciation pool.

6. Understand PAYG and Superannuation Obligations If you employ staff, you have two key obligations:

   • PAYG Withholding: Deduct income tax from your employees' wages and report/pay this to the ATO.

   • Superannuation: Pay mandatory superannuation contributions (the Super Guarantee) for eligible employees. The Super Guarantee rate is scheduled to increase to 12% of an employee's ordinary time earnings for the 2025-2026 financial year and onwards.

7. Consider Tax Planning Strategies Proactive planning can reduce your tax liability. Strategies include:

   • Utilising the small business tax concessions (e.g., lower corporate tax rate, immediate write-offs).

   • Timing income and expenses to manage tax outcomes.

   • Reviewing your business structure as your turnover and complexity grow.

8. Stay Informed of Tax Changes Australian tax laws change frequently. Refer to the official ATO website and consult with a tax professional to ensure compliance and to take advantage of new tax savings opportunities.