Ok so you have your brilliant new business idea that is going to bring you unprecedented wealth. Or perhaps you’ve acquired or overtaken an existing business and plan to hit the ground running.
When starting out it is important to arm yourself with as much knowledge as you can. This includes the general details about your own business, the industry you are operating in, your customers and competitors. However, also of great importance is a basic understanding of what could potentially lie ahead from a taxation and financial point of view.
Here are but just a few things to consider for start-up or relatively new businesses:
- Have you sought advice on how to structure your business? This is critically important in maintaining the protection of your other assets, paying an efficient and appropriate rate of tax, and also in allowing for future financing and investing opportunities
- Will you have any significant initial financial outlays, for example stock, equipment, rebranding etc? Will you need to borrow funds to make this happen? Do you have the borrowing capacity given the increasingly tighter lending conditions?
- What insurances will you require and when will these need to be in place?
- Are you going to need to employ other people? If so on what basis – casual, part-time, full time?
- For existing businesses, are you aware of what you owe in employee entitlements like annual leave and superannuation?
- Are you eligible for any government subsidies for taking on new employees?
- Are you aware of the various income tax incentives applicable to you/your business?
- Do you have an efficient record-keeping system in place so you have access to timely information as to the profitability of your business?
- Will a changing political landscape impact on your business or taxation affairs (Labor’s proposed changes to the taxation of family trusts and negative gearing for example are going to have far-reaching consequences)
Whatever your situation, a business with a swelling bottom line is fantastic, but can bring with it some nasty and unexpected tax and cash flow surprises if you aren’t prepared and aware of what lies ahead.
Start-up businesses need to be mindful of potential tax bills after the end of the first financial year of operation, and budget their cash flow accordingly.
Cash flow can become more problematic for new businesses as the ATO can require up-front payments for estimated current year tax liabilities (through the PAYG Income Tax Instalment system). At the same time the business is required to pay potentially large tax bills from the previous financial year!
The above issues can also apply to your existing business if you have been going through a growth phase of late.
So although the thought of paying tax may not enthuse you too much it is far better knowing where you stand, and what is coming up. This means your business can continue to expand and be in a position to seize upon any opportunities that present themselves without being constrained by unexpected tax liabilities.
Take control of your business and your taxes. It is best to seek professional advice to understand the tax implications and benefits for your personal situation. Book your appointment with our team now by getting in touch with BLG Business Advisers online or by calling (02) 4229 2211.