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Starting a Business in Australia – A Quick Guide
The allure of entrepreneurship is undeniable, and for many Australians, starting their own business is motivated by the pursuit of autonomy, escaping the 9-to-5 grind, and carving their own path. If you’re considering starting a business, you might be drawn in by the opportunity to purse a passion full-time. Even beyond these personal motivations, business ownership presents the potential for your own financial growth, a chance to bring innovative solutions to market, create job opportunities, and contribute to the broader economy. As exciting as this journey is, however, it also brings with it uncertainties and challenges. To navigate this path with confidence, it is important to understand the key steps required to get started. From registering your business to strategic planning, the decisions you make in the early stages has a significant impact on the rest of your business journey. Here are four key items to tick off when starting a business in Australia.
Register for an ABN
Your Australian Business Number (ABN) is more than just a number; it’s your business’ identity in the Australian marketplace. It facilitates business transactions, helps when purchasing goods, and supports the claiming of Goods and Services Tax (GST) credits. Fundamentally, starting and operating a business in Australia can’t happen without one. To register, you’ll need to visit the Australian Business Register’s website and apply for your ABN. You’ll also need some key information handy when you go through the application process. This includes:
- Your tax file number (TFN)
- Entity Legal Name
- Business Contact Details (e.g physical/postal addresses, email address, phone number)
- Business activity information
Understand Your Business Structure Options
There are a number of different business structure options available to you as a business owner. The four most common are sole trader (most common for new businesses), partnership, company and trust. There are advantages and disadvantages to each, outlined below.
| Structure | Pros | Cons/Considerations |
|---|---|---|
| Sole Trader | Low cost; simple structure; gives you full control; fewer reporting requirements; use your own tax file number (TFN) to lodge returns; ability to employ staff. | Legal responsibility for all aspects of the business (incl. debts & losses); requires you to keep financial records for 5 years minimum; unlimited liability, all personal assets are at risk; you are personally liable to pay tax on all income derived. |
| Partnership | Relatively easy and inexpensive to set up; minimal reporting requirements; share control and management of the business; you don’t pay tax on the net income earned, as each partner pays tax on the share of the net income they receive. | Must register for GST if turnover is $75,000 or more; requires separate TFNs; each partner is responsible for their own superannuation arrangements; partnership tax return to be lodged with the Australian Taxation Office (ATO). |
| Company | Limited liability; wider access to capital; greater personal asset protection (company is liable for debt); Set corporate tax rate if required conditions are met (allowing for potentially lower taxes on profits). | Higher set-up costs; generally, more paperwork and higher ongoing costs; directors have legal responsibility to ensure the company meets its pay as you go (PAYG) withholding and superannuation guarantee charge (SGC) obligations. |
| Trust | Good asset protection; limits liability for trustees in relation to the business; beneficiaries of a trust are generally not liable for the trust debts; beneficiaries pay income tax on income they receive at their own marginal rates. | Can be expensive to set up and operate; requires a formal trust deed that outlines the operation of the trust; require the trustee to undertake formal yearly administrative tasks. |
Note – Partnerships can take three different forms. A General Partnership is where all partners are equally responsible for business management and have unlimited liability for it debts and obligations. Limited Partnerships have general partners, where their liability is limited to the amount of money they have contributed. Incorporated Limited Partnerships involve a minimum of one general partner with unlimited liability, who is responsible for any obligation shortfalls.
Of course, as your business grows and changes, you can change your structure accordingly. Basically, don’t set and forget! See our article “From Sole Trader to Company – Is My Business Ready?” for more on those transitional phases.
Succession Planning Considerations
When we think of succession planning, it’s easy to assume it’s a consideration for mature, established businesses. However, even in the start-up phase, understanding the trajectory of your business’ leadership is crucial. Having foresight in this area ensures business continuity, investor confidence (where applicable), and the safeguarding of the company’s legacy. Succession planning isn’t just about replacing leadership – it’s about ensuring the company’s mission persists. In the volatile world of start-ups, having a clear plan and robust risk management sets you off on the right foot.
Document your plan for the future, including where you plan to be in the leadership structure in 10, 20, 30 years’ time. The clarity of a written plan will help you stay on track. Review it over time as things change and your business grows – perhaps you take on long-standing staff members that could take the reins when it’s your time to move on.
Engage an Accountant and Business Adviser
An accountant and business adviser acts as your travelling partner on your business journey – helping you navigate the complex landscape of legislation, compliance, regulations, and much more. Fundamentally, accountants take care of tax and compliance while you run your business, and advisers leverage their expertise and experience with clients in a range of industries to shape your business according to your vision.
When starting your business in Australia, the Business Improvement team at McKinley Plowman combine decades of experience and close working relationships with our tax and accounting teams to partner with you all the way from startup, through growth phases, and succession and exit planning. For a free consult to see how we can help you, contact us today on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or via our website.
written by:
Levi Both
Since entering the accounting industry over a decade ago, Levi has worked in senior positions alongside clients of all different sizes and industries, and joined McKinley Plowman in 2022. He combines his invaluable experience with his Chartered Accountant (CA) and Chartered Tax Adviser (CTA) qualifications, and delivers outstanding results for MP+ clients. At MP+, Levi works with clients to start, grow, and improve their business, and enjoys developing sounds tax and business development strategies to help them reach their goals.
Levi has a particular knack for optimising tax results, equipping clients with effective business structures, and delivering thorough forecasting to facilitate business growth. He loves seeing clients achieve their growth objectives and obtaining optimal tax results.
When he’s not in the office working hard for clients, you’ll find Levi spending time with his young family, and playing & watching soccer and AFL.
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