Even if your business is brand new or very small, or not even profitable, it still has important responsibilities to the Australian Taxation Office. Whether tax, GST or BAS, it’s a very serious matter if you fail to comply. The penalties are severe, even for an honest mistake.
Most non-compliance is due to the complexity of the tax system rather than an intention to cheat. But your business could still face heavy fines.
Learning about compliance
So how can you find out what your compliance obligations are?
There’s a lot of free information and advice available to small businesses. The Government’s business portal gives an overview of the legal essentials that may apply to you, including how to register your business properly.
It’s also good idea to seek advice from other professionals such as lawyers and accountants. The money you invest in their advice will be saved multiple times over if you avoid a fine later on.
Professional associations can also be helpful. Your business may have an industry association that runs seminars, and sends newsletters summarising the latest changes to the law.
The ATO also has a small business newsroom specifically aimed at keeping SMBs up to date with taxation changes. It also provides advice on areas such as how to correctly change your company structure, or meet your obligations when winding down a business. It also has a list of upcoming lodgement dates.
Some of the things you need to be aware of include:
All Australian businesses need a business name and an Australian Business Number (ABN), even if you work alone as a sole operator or independent contractors.
You’ll also need to obtain a TFN (Tax File Number). If your business has a turnover of more than $75,000 a year you’ll need to register for GST. Other taxes to register for may include Pay As You Go (PAYG) withholding, Payroll tax and Fringe benefits tax.
Depending on the nature of your business and its location, you may need a licence to operate. The Australian Business Licence and Information Service (ABLIS) site has a free search tool to help you work out what licenses you may need, if any. These are usually tax deductible expenses.
At certain dates throughout the year, which may depend on the size of your business, you’ll need to lodge various statements with the ATO as well as make tax payments. Some of these include income tax, PAYG withholding summaries, your BAS (business activity statement) and of course your personal income tax. You can’t leave all of it to the 30th June, as many things are required on different dates.
Once you have an idea of what you’re supposed to do, how can you stay compliant?
Using professional small business accounting software is a good way to start. It gets updated with constantly evolving laws. So if there’s a new requirement to submit certain data by a specific date, it should automatically alert you.
Hiring an expert accountant is also wise. An accountant experienced in small business will anticipate any issues, and let you know exactly what they need from you and when. They may even be able to work with your own accounting software, or files exported from it.
Tax laws are constantly evolving and are a burden for most small businesses to keep up with. However the ATO is getting increasingly sophisticated at catching both intentional and unintentional tax evaders. Over the past year it has identified 270,000 businesses as potentially under-disclosing income.
So don’t get caught out: make sure your accounts are in order, that you’re organised, and that you keep up to date with any changes.
If you want to learn more about accounting software and how it can help your business thrive, download our free ebook ‘Keeping on top of compliance: Why your business accounts should be online’.