5 Tax Tips for Starting Your Own Business
Starting your own business can be an exciting time. In the midst of getting organised and setting up the new enterprise, it’s easy to overlook a few key things. Tax, above all, shouldn’t be neglected. Tax minimisation and compliance begins from the very start. There are quality accountants in Sydney who can assist with helping you optimising your structures for tax, even at the inception stage of your new business. These are five practical tax tips to know as you get started.
1. Put Tax into Perspective
Tax shouldn’t be an once-a-year activity. Tax planning and compliance should take an important role in everyday and longer term decision making from the start. The impact of any tax concessions on cash flow should be considered from a wider perspective.
While it’s important to save tax dollars where possible, major financial and business decisions should be also made on the basis of strategy and future growth rather than tax minimisation alone. Balancing tax issues against the commercial interests of the business is a good way to put tax into perspective. New investments and expansion plans should be undertaken for their inherent commercial value and not only for the tax benefits they bring.
2. Choose the Right Business Structure
There are four commonly used businesses structures in Australia: sole trader, partnership, company, and trust. Your choice of business structure can significantly affect your day-to-day operations and longer term issues in a number of ways:
- Personal liability – incorporated companies have limited liability so they usually only have to pay creditors to the extent of existing assets. Operating a company as a separate legal entity can help protect your personal assets.
- Tax – rules relating to capital gains and income can differ significantly between different business structures.
- Transfer of Ownership – for some structures, such as the company, it can be easier to transfer ownership if, for example, you want sell your business in the future.
There are many other things to consider when choosing the right business structure such as running costs, reporting requirements, and the nature of your business. It’s a good idea to speak to your accountant about the best structure for your circumstances if you have any doubts.
3. Be Clear About Compliance Obligations
Equally, it’s important to be aware of compliance obligations from the beginning. This helps you stay organised and generate reports quickly when reporting periods come around. Reporting obligations can differ depending on your business structure, whether you have employees, and the nature of your business. There are a range of firms that can provide compliance advice as well as assistance with business tax and tax returns in Sydney. Being clear about your compliance obligations helps you setup good record keeping structures and integrate these into your business systems for easy reporting.
4. Get to Know Incentives and Exemptions
Some businesses are eligible for special incentives and exemptions. These include the R&D Tax Concession and Small Business Capital Gains Tax Concession, both of which can put cash back into your business at certain stages of operation or when certain transactions occur. For start ups and smaller businesses, these incentives can help boost cashflow and contribute to smoother sailing.
5. Seek Advice When You Need It
Starting your own business often entails ‘on the job learning’ and developing new skill sets. As such, it’s a good idea to set up a network of contacts or advisors to whom you can turn to for advice and important information.