Coco Hou: Setting up business in Australia requires sound knowledge
- Written by Asian Spectator
Coco Hou, tax specialist and accountant, has shared her advice for those wanting to set up or manage a business in Australia, whether it be starting up a new business, undertaking consultancy work or managing an existing business. Australia is considered an ideal destination for innovation and opportunity. While the Australian Department of Home Affairs can assist with visa issues, there are many other important issues to consider when setting up a business in Australia.
“The number one element of setting up your own business is understanding what kind of business you want to start. This may seem simple, but there are big differences between sole traders, partnerships, companies and trusts,” says CocoHou.
Sole traders lodge a single tax return for their income, as there is no separate business tax return. Sole traders pay taxes at the same tax rates as individuals, and there is a tax-free threshold.
Companies are taxed as a separate entity, and as a director you must file both a company tax return and an individual tax return. There is no tax-free threshold for companies.
While the right structure for your business will depend on your income and the benefits and deductions you can claim, the overhead and ongoing costs of sole trading are lower than that of companies, as sole trading is a simpler structure.
Partnerships are for when a group of people run a business together, but not as a company. Each partner will file a personal income tax return.
Trusts involve holding property or assets for the benefits of others. Beneficiaries will pay income tax on income received from trusts throughout the year.
No structure is better or worse than any other, but it is worth carefully considering the overhead and ongoing costs of each structure, and weighing up the deductions and benefits of each structure.
“Remember, while it’s best to figure out which structure is best for you as you start out, you can change the form your business takes later on,” says Coco Hou.
Personal Service Income is another key factor in new businesses tax obligations.
Coco says, “If the majority of your business income is in the form of personal income, then it will be taxed as personal income, and tax benefits related to the specific structure of your business may be unimportant.”
Coco emphasises how important it is to be above the board with taxes.
“For a new business it is important to get things right from day one. If you’re functioning as a sole trader, you can claim business expenses as tax deductions. While this is a great benefit, make sure your documentation is entirely in order before you claim.
“You never know when you might be audited, and it can be a devastating blow to a small business to be fined or to incur interest because of an error in tax files. This is why I suggest to meet with a good accountant before you get started to ensure you are setting things up in the most suitable way possible.”
For novices to business, who are only just starting on their journey, my advice is to not only find a good accountant to help you set things up, but to continue working work them to check and assist along the way with taxes and expenses.
“That first overhead can seem a big and daunting, but it’s worth hiring an accountant to help out. If you have arrived into Australia on a particular type of visa, it is imperative that you follow all the necessary requirements to ensure you are meeting your obligations. A good accountant will be able to assist with this process,"says Coco Hou.
“Having that peace of mind, and the security of a professional accountant to ensure your taxes are correct, your finances are in order and you are meeting your obligations is priceless.”
Coco wishes the best of luck to all those starting new ventures in the new financial year.
“Starting on a new business venture is exciting and amazing, and to have a stress free, informed approach to taxes is the best thing for your new journey. It allows you to focus fully on realising your dream.”
Coco Hou, is the Managing Director of Platinum Professional Training. Platinum is one of Australia’s largest accounting training and internship providers with offices across all major Australian cities. Coco Hou is also a CPA qualified accountant and Managing Director of Platinum Accounting. Coco Hou assists businesses across Australia as well as assisting those setting up new businesses or managing existing businesses in Australia.
