Starting a Business in Australia in 2024
10 Steps to Start a Business in Australia
STEP 1 - Register for Australian Business Number (ABN)
You will need an ABN when starting a business in Australia, but…
What exactly is an ABN?
An Australian Business Number (ABN) is a unique 11-digit number that the government and community use to identify your business or organisation. Every business in Australia needs one to start trading as a formal entity, whether you’re a sole trader or multi-national corporation. Though there are some limitations.
The significance of having an ABN
Businesses with a GST turnover of $75,000 or more are required to have an ABN.
An ABN allows you to collect GST credits for any GST paid on products or services used in your business if you’re registered for GST.
On top of that, customers can deduct 46.5 percent in withholding tax on sales if you don’t have an ABN. Therefore, it’s always preferable to register even if you’re just starting out. There are also times when third parties may need an ABN over the normal course of business.
Requirements for the ABN Application
- Tax file number (TFN).
- Your previously held ABN (If applicable).
- Australian company number (ACN) or Australian registered body number (ARBN) (If applicable).
- The date from which your ABN is required.
- The entity’s legal name.
- The details of any authorised contacts.
- Business contact details including an address, postal address, email address and telephone
- Business activity – usually the main source of income for your enterprise.
- At least one Business location – this where you will receive your official correspondence.
Registered business name (optional)
You may need a registered business name if you want to trade under a name other than your registered company name.
Example:
You set up ‘ABC Pty Ltd’ but want to trade as ‘Fullstack Advisory’ In this case, you would need to register both the company name and the business name ‘Fullstack Advisory’.
Sole Traders may want to register a business name separate to their full name. On formal business documents, your name (let’s say it’s Sam Example) would appear as Sam Example t/a (trading as) Sam’s Innovations.
You may register a business name at the ASIC Business Name website, or through a private provider. These providers usually charge a fee above ASIC’s nominal charge.
Download the ultimate guide to start a business in Australia.
To report and lodge your business tax returns, GST, and Pay As You Go Withholding (PAYGW) to the Australian Taxation Office (ATO), you must have a business.
Your TFN will be automatically issued to you if you choose to register for a TFN on the same form as your ABN application. You can use your individual TFN if you are a sole trader.
Is it necessary to register for GST when starting a business?
Yes, you need to register for Goods & Services Tax (GST) if you:
- Own a business with an annual GST turnover of $75,000 or more
- Want to claim fuel tax credits for your company
- Provide taxi transportation (including but not limited to ride sharing services)
You must register within 21 days of exceeding the relevant turnover threshold.
Other benefits of registering for GST early:
- Get your GST credits refunded by the ATO if you are in a loss position
- Prepares you for eventual operation under GST (don’t need to shift gears later).
- Requires you to keep better records early on in your company’s lifetime.
The Two Methods for Accounting for GST
You can choose from 2 ways to account for GST:
Cash – based on the date the payment is made or received
Actual – based on the invoice date, which can differ to the above date
If you are obligated to report and pay GST to the ATO, you need to file a quarterly ‘Business Activity Statement’ (BAS) or an annual GST return.
Learn more in our Startup 101 Ultimate Guide.
The GST method you select will have a significant impact on your cashflow. Get professional advice from Fullstack Advisory.This section is if you have employees – but still worth knowing if you are looking to hire in the future!
As a founder and business owner, you have a responsibility to aid your employees in meeting their end-of-year tax obligations. You can accomplish this by collecting pay as you go (PAYG) withholding amounts from payments made to your employees, other workers such as contractors, and businesses that don’t quote their Australian business number (ABN).
STP is a way for the ATO to receive payroll and superannuation information on an ongoing basis.
When you submit the payroll for the individual periods (via Xero), you will also report to the ATO your employees’ payroll information, such as salaries and wages, pay as you go (PAYG) withholding tax, and superannuation.
When starting a business, it’s a good idea to protect your company and reduce its exposure to risk with the right insurance.
The following are some examples of common types of insurance for Australian businesses:
- Workers’ compensation – If you have employees, you must have workers’ compensation insurance. This is mandated by Australian law.
- Public liability insurance – Certain types of businesses are required to obtain public liability insurance. This insurance protects you against third-party death or injury.
- Third-party personal injury insurance – You have to purchase third-party personal injury insurance if you own a motor vehicle. Check your vehicle registration fee because this insurance is often a part of that.
- Professional indemnity insurance – This insurance is a must if you work in a profession where you give advice or provide a service.
- Product Liability Insurance – Product liability insurance protects your company from financial losses that may arise because of a claim for third-party personal injury or property damage caused by a product/s your company provided.
- Cyber Liability Insurance – if you work with tech (which is most businesses!), cyber liability insurance protects your company from breaches of security and privacy and theft of customer data. Some policies may also cover you for lost revenue due to downtime or cyber attack.
Good record keeping makes it easier to monitor cash flow, satisfy tax requirements, and understand how your company is performing. Some are also mandatory.
You are required by law to:
- Explain every transaction
- Put your records in writing (electronic or paper)
- Write in English or in a format that can be easily translated
- Ensure your records can be retained for a minimum period of five years (certain records may need to be kept for a longer period)
Remember: Penalties may apply if you fail to preserve proper tax records.
You can download this Guide as a PDF.
You’ll need reliable accounting software to help you with routine accounting activities like recording payments, managing expenses, invoicing clients, and reconciling transactions. Your software will also provide you with insights into your company’s financial health, allowing you to develop reports that will aid in the analysis of your company’s performance.
When you start a business, try to aim at using the automated features of your online accounting software, you will be able to save time and have enhanced reporting to help you make better business decisions.
You may also get these other benefits depending on the software you’ll use:
- Easily access your data in the cloud
- Login from any device remotely
- Automatic integration with your bank fees
- Automatic bank reconciliations using bank rules
- Easier personnel management
- Insightful automatic reports
Xero is the leader in accounting software in Australia and has many integrations to make your accounting situation a whole bunch easier.As a first stage in building your company’s accounting system, you’ll need to set up your chart of accounts. The business you run determines the accounts you will use.
You will need to separate:
- Business income
- Expenses
- Assets – what your business owns
- Liabilities – what your business owes
This will help you easily assess your company’s financial health and ensure that the financial statements follow ASIC and ATO regulations.
You can also break this down into individual categories to track your spending and income at a granular level, e.g. “Legal fees” or “Product income.” This comes in handy for financial modelling. You will have to label and track each line item and ensure they fall into the same category each time.
Getting this right from the start is crucial to the growth of the business you are starting.
You will be well equipped to make the necessary decisions effectively and efficiently when your chart of accounts is setup in a way that allows you to quickly and easily analyse your financial performance.
If you wish to pay yourself and/or others a salary, you have to configure your accounting software’s payroll function. Payroll functions need to be set-up if you want to process employee payments, track amounts owed to the ATO, and print pay slips from your accounting software.
Important employee entitlements, such as annual leave, sick leave, and TFN declarations, should be properly configured in the accounting software.
Important to remember:
Employees must provide their superannuation fund within 28 days of starting work. If this does not happen, you will need to configure them with a default fund.
Other things to consider when you have employees:
- Full-time employees work 38 hours a week per week on average
- Full-time employees have the right to 152 hours of annual leave per year
- Full-time employees are entitled to 10 days of personal/sick leave each year
- Employees have the right to the 10 National Employment Standards
- Employees are entitled to superannuation at a rate of 11 percent of their regular hourly wages (2023)
- Review industry awards to ensure that other factors such as minimum wages or awards are taken into account
Download the ultimate guide to start a business in Australia.
5 other key considerations
1. Hiring checklist
Employment contract
A well-drafted employment contract benefits both the employee and the company. It reports each party’s rights and obligations, safeguards the employee’s job security, and protects the employer from certain dangers. Make sure you have a solid employee contract when you start a business in Australia.
Worker compensation
A worker’s compensation policy protects your employees in the case of a workplace injury or illness.
In NSW, all employers (excluding exempt employers) are required to hold a workers compensation policy.
NOTE: Any company that employs or hires full-time, part-time, or casual workers is considered an employer.
TFN declaration and superannuation
Once an employee has signed an employment contract with you, they must complete a TFN declaration form and give super details.
If you use Single Touch Payroll (STP), your employees will be able to complete and submit their TFN declaration and other paperwork online when they start. Employees can do this via their ATO mygov account. Inquire with your software vendor or payroll service provider if your program supports online enrollment.
Employment records and pay slips
All employment records must be kept for a minimum period of seven years (Fair Work Act 2009).
2. BAS Due Dates
You may be entitled for an extra two weeks to lodge and pay your quarterly BAS if you lodge online.
You can download this Guide as a PDF.
3. Government Grants after Starting a Business in Australia
Early Stage Innovation Company (ESIC)
ESIC accreditation provides early-stage investors with a tax offset of 20% of the total paid to acquire shares. The maximum ESIC tax offset that an investor is entitled to in an income year is $200,000. As a result, ESIC status may make a startup a more attractive investment proposition.
A company qualifies as an ESIC if it meets both:
- the early-stage test (the company has less than $200,000 in assessable income and is not public) and either the;
- 100-point innovation test or
- principles-based innovation test.
Both these tests are aimed at identifying companies as both early-stage and genuinely engaged in innovation activities.
R&D Tax Incentive
Provides a tax offset for some of the cost of undertaking eligible research and development (R&D) activities by reducing a company’s income tax liability. Tax offsets of 43.5% or 38.5% are available for costs incurred on eligible activities (depending on a company’s annual aggregated turnover).
Importantly the 43.5% benefit can be a refundable offset, meaning that a cash refund is paid even if the company incurs a taxable loss.
This may be an important source of funding after you start your business.
Export Market Development Grant (EMDG)
The Export Market Development Grants (EMDG) scheme is available to a wide range of small to medium businesses looking to market their products, IP, events, software, or services overseas.
Applicants may be companies or representatives of these companies. The funds must be used for marketing your products/services in foreign marketplaces or training in skills for marketing services overseas. This could take the form of flights and accommodation to learn about your foreign market or marketing training, as two examples.
There are three tiers of support as of 2024 for companies that are:
- Ready to export (Tier 1)
- Exporting and expanding (Tier 2)
- Exporting, expanding and strategic shift. (Tier 3)
A business does not need to begin at Tier 1 to be eligible for Tier 2 or 3 or vice versa. Your business must have a turnover of less than $20 million to be eligible.
The EMDG offers three rounds of funding each year from a centralised funding pool. The funding is eligibility and demand driven. Grant amounts and agreements may vary due to fund availability and AusTrade assessment.
The grant amounts for Round 1 were:
- Tier 1 – up to $15,000 per financial year
- Tier 2 – up to $24,600 per financial year
- Tier 3 – up to $36,600 per financial year
- Representative bodies – up to $90,000 per financial year.
The grant amounts for Round 2 were:
- Tier 1 – up to $10,000 per financial year
- Tier 2 – up to $18,000 per financial year
- Tier 3 – up to $28,000 per financial year
- Representative bodies – up to $50,000 per financial year.
The grant amounts for Round 3 were:
- Tier 1 – up to $12,000 per financial year
- Tier 2 – up to $20,000 per financial year
- Tier 3 – up to $30,000 per financial year
- Representative bodies – up to $45,000 per financial year.
The EMDG is not available for businesses attempting to market products to Russia or Belarus.
To see which grants & incentives you might be eligible for please to Fullstack Government Grants and Incentives team.
Fullstack has assisted dozens of start-ups and founders to secure funding from government grants, especially the R&D Tax Incentive.4. Cashflow Management
Many startup failures occur because of one thing – running out of cash – and a high proportion of those are simply because of poor cash management. Once you start your business, make sure this doesn’t happen to you.
According to ASIC, 10.5% of insolvent businesses fail due to “poor financial control and lack of records” and 16.6% fail due to “inadequate cashflow or high cash use” (2023).
Robust, timely and reliable cashflow forecasting and management is therefore an essential function within any startup or high growth venture.
4.1 Constructing a Cashflow Forecast
A cashflow forecast has two components – cash inflows and cash outflows.
The cashflow forecasting itself should be divided into regular (at the minimum monthly) periods and extend for a minimum 12 months – beyond this period the forecast will likely become unrealistic and unreliable.
The overall structure, for each period, is;
- Opening cash balance $100,000
- Add Cash inflows $2,000
- Less Cash outflows $(5,000)
to give;
- Closing cash balance $97,000
- Cash Burn for the period $(3,000)
5. Brand Protection
Investing in your brand means securing it from any potential damage both now and as your business grows. Here are some ways new startups in Australia can protect their brand:
– Register trade marks
– Register a business and domain name
– Sign employee agreements
– Prepare an intellectual property (IP) assignment agreement
Learn more about each of these here.
5.1 Domain Names in the .au Namespace
.com.au and .net.au domain names are protected by the .au Domain Administration (auDA) and require an ABN at the minimum to be eligible for registration. Direct registration (.au) is also available for any entity with a connection to Australia.
Your domain name must closely and substantially match the content of your website or match, be an acronym of, or related to your business name, personal name, trademark, or trustee name. This prevents “domain squatting” or businesses buying up swathes of domain names to sell on the secondary market (i.e., not direct from an accredited auDA registrar.)
Your ABN and business name does not guarantee your chosen domain name will be available to you simply because you satisfy these criteria. In the .au domain space, there is no hierarchy of rights. Each domain name is available on a “first come, first served” basis.
For example, let’s assume the name of the business you started is Sam from Sam’s Innovations. The registrant entity (ABN) for the domain name is The Sam Example Trust. Your trading name is Sam’s Innovations.
You would be eligible for domain names based upon these attributes, e.g.; samsinnovations.com.au, samexample.com.au, exampletrust.com.au, innovationssam.com.au, and so on. You would also be eligible to register generic domain names such as innovations.com.au under the rules.
However, you need to prove a close and substantial connection to your domain if ownership is ever disputed by a third party. Let’s say you tried to register technology.com.au. Though your business may sell technology, an entity registered as Technology Pty. Ltd. also has a valid claim: as well as the rights holders or trademark owners of companies that use “technology” as part of their name.
They may appeal to the auDA to have your name deleted, if they rule your business is not closely or substantially connected to the domain name.
auDA does not transfer ineligible domain names to “compliant” third parties; they will be made available in the domain for registration once they appear on the drop list. More information here.
The Fullstack Difference
Fullstack is a market disruptor in the accounting services industry. Our innovative business model and custom-built processes assist our accountants and advisors in providing efficient, high-quality and affordable services for founders just starting a business and entrepreneurs.
Best Accounting Practices
We partner with your startup from day one, ensuring your financial processes and procedures adhere to best practices in terms of tax, record keeping, financial reporting, and due diligence.
Virtual CFO
Fullstack are leaders in providing an end-to-end solution for financial control and reporting expertise. Your VCFO oversees high-quality finance department as well as additional strategic support for capitalising on future opportunities.
Complete funding resource
As leaders in connecting founders with government tax incentives and grants, we can help your business with preparing and lodging grant applications so you can take advantage of every opportunity including the Export Marketing Development Grant & R&D finance.
Executive Advisory
We provide C-level and tactical support for your new startup that extends to all parts of the business including HR, communications, strategic planning, operations management, and decision support.
Technology Implementation
Fullstack advises and implements a full accounting and financial technology stack to enable your business to take advantage of enhanced reporting and streamlined processes from day one.
Fullstack is a leader in delivering tech-powered accounting and financial advisory services in Australia and have assisted tons of innovative businesses and startups to date.
We encourage readers to draw upon the detailed insights provided in this guide to get to the next level. If you would like help for your business, please contact us.
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