Our focus
New businesses sometimes make mistakes with their registration, reporting and recordkeeping responsibilities. It’s important new business owners understand their obligations to ensure they're getting it right from the start.
If your hobby has turned into a profit-making business, you are responsible for your tax, super and registration obligations. Setting up your business correctly from the start will make it easier to meet these obligations.
How to get it right
If you're planning on starting, or have recently started a new business, we have Ready for business information to help you navigate your obligations.
Here are the top 7 things you need to know when starting a business.
- Use digital tools and maintain accurate records to help you manage daily activities and cash flow. Explore our key rules and free resources to strengthen your business practices.
- There are some registrations you will need to complete when you start a business, for example registering for an ABN or a business name.
- You can claim a tax deduction for most business expenses if they are directly related to earning your income. Remember to keep records and only claim the business portion of mixed-use expenses.
- The type of business structure you set up will affect your tax and registration requirements. It's important to choose the right business structure and understand your obligations.
- If you're an employer, it's important you know you have extra responsibilities and obligations.
- You need to lodge and pay your taxes on time. You can prepay your estimated income tax liability, through pay as you go (PAYG) instalments. You can voluntarily enter PAYG instalments to help you smooth out your cashflow and avoid a large tax bill when you lodge your tax return.
- Businesses that maintain accurate records, lodge and pay on time and avoid errors not only steer clear of penalties and general interest charge but also become more resilient when facing challenges.
Example: Barry’s photography hobby takes flight
Barry works an office job Monday to Friday and enjoys taking photos of birds in his spare time. Barry has become well known by members of his local community as a talented photographer.
Over the past 12 months Barry has been approached to photograph local events and demand for his skills is increasing. Barry charges a fee for each event and is now earning money from his photos.
With the growing interest, Barry cuts back on his office work and starts to invest more time into photography. Barry sets up a website, sets up a booking system and starts advertising his services online. He also buys more photography equipment to improve his production quality, so he can earn more from each event.
Barry wants to know if his photography side hustle is a business. He looks at all his activities together and determines he is running a business because he:
- intends to make a profit to supplement his salary and wage income
- set up a regular schedule for these activities
- operates in a business-like way (he has a plan and system for making a profit).
Know your responsibilities as an employer
Whether you're hiring your first worker, or you're an experienced employer, it's important you understand and meet your employer obligations. This includes:
- reporting tax and super information to us through Single Touch Payroll (STP) enabled software each time you make a payment to your workers
- withholding a portion of your workers' pay for tax (PAYG withholding) and paying it to the ATO
- paying the right amount of super guarantee (SG) on time and to the right fund
- reporting and paying your fringe benefits tax (FBT) on time.
Keep up to date
Learn more by taking our free self-paced online courses at Essentials to strengthen your small businessExternal Link.
You can also:
- subscribe to our free Small business newsletter to get updates that might impact your business
- contact your tax professional to obtain advice specific to your business needs.