Disclosure: This article is not intended to replace in any way professional accounting and legal advice.
There are so many different tax requirements that startups need to worry about. From when to pay GST to when to lodge a tax return to when to start paying superannuation, the list starts to get very exhaustive.
Below are some of the common requirements you need to be on top of as a startup.
- When do I register for GST?
- You are required to register your startup for GST when your revenue reaches $75,000 in total for the current month and previous 11 months, or if you anticipate your revenue to reach $75,000 over the next 12 months. You can register for GST online
- If you do not meet the above turnover requirements, GST registration is optional
- When registering for GST, you will need to decide whether you will be using the cash or accrual (non-cash) method. Under the cash method, you record GST when income is received and expenses are paid. However, using the accrual method, GST is based on invoice date, regardless of when payment is received or made.
2. Hiring staff - what do I need to know for tax?
It goes without saying that when hiring staff there are a lot of different Human Resources requirements you need to be aware of. In terms of tax, these are some of the basics
- Provide staff with a Tax File Number (TFN) Declaration Form when they start work. This form notifies the ATO of the employees’ TFN and employment details, and alerts you as to whether extra tax (to cover such things as HECS/HELP debt) needs to be taken out.
- Provide staff with a Standard Choice Superannuation Form if they will be earning at least $450/month. You must also ensure you have set up what’s called a ‘default superannuation fund’ for your startup. This is a superannuation fund that your staff can choose to have their superannuation paid into.
- Calculate if you are required to withhold tax from your staff pay. Generally speaking, you will need to withhold tax if your staff will be earning at least $18,200 per year. However, if your staff also have employment elsewhere or if they are not an Australian resident you may need to withhold tax regardless of their income. For more information on this, refer to the ATO Tax Withheld Calculator. If you are required to withhold tax, you will need to complete the PAYG Withholding Tax Registration with the ATO.
3. When do I need to pay my staff superannuation
- Both casual and permanent staff are eligible for superannuation.
- You need to pay superannuation for your staff when they earn at least $450/month.
- Superannuation must be paid to your employees’ superannuation fund by the 28th of each month following quarter-end (i.e. 28th July, 28th October, 28th January, 28th April)
- Paying superannuation is one thing you really don’t want to be late with. Even one day late can result in fines.
- Startups can be on an annual, quarterly or monthly BAS cycle. The majority of startups we work with at Nudge are on a quarterly BAS cycle
- In preparing your BAS, you need to include details of your GST, PAYG Withholding (being tax withheld from wages), and PAYG Instalments (your business tax instalments) – these are only applicable if you paid tax on your business income in your previous year’s tax return).
- If you lodge BAS quarterly, your BAS are due the 28th of the month following quarter end, except for the December quarter, which is due 28th February (an extension is given due to the Christmas period). If a Tax Agent or BAS Agent takes care of your BAS for you, they generally receive an extension of almost one month on the above dates (except for December quarter)
5. Tax Returns
- The Tax Return ‘type’ you prepare for your startup depends on your business structure. If you operate your startup as a sole trader, then your business income is included in your own personal tax return. However, if you operate your business as a partnership, company or trust then you need to prepare a separate tax return (i.e. in addition to your personal tax return)
- The due date for your personal tax return is 28th October. The due dates for partnership, company and trust tax returns are available here. If lodging through a tax agent, you will generally be able to receive an extension on these due dates.
It is important to note that this list is not exhaustive by any means. It only includes a list of common scenarios experienced by many startups we come across at Nudge. Different requirements apply for not-for-profit businesses and those with special circumstances.
There’s a lot here, but don’t be overwhelmed. It’s important to understand what you need to do and get the basics right so that you can grow your startup.