Interested in Starting a Small Business - I have a few Queries

Ok, well I'm just making this thread to get a little bit of feedback, and some helpful info/tips.

Basically, I tend to have a lot of spare time in my current job. I work a 24x7 rotating roster and typically work 4 shifts on, 4 shifts off. Occasionally I will have as much as 6-8 days off even.

In light of this I've been trying to figure out something to do with my spare time that could help generate some sort of cash flow. Aside from investing, a second job was always something that crossed my mind.

I was thinking of starting a small business for home computer networking, troubleshooting, and hardware installation, and later on expanding into small office.

This would just be a thing on the side, so not getting much business wouldn't be an issue as I'd still be working my current job, which pays me more then enough.

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My questions are;

1. What would be involved in the initial setup of the business..? I know I'll need to get an ABN (again, my old one expired), but what else? Do I need to register a business name to or something?

2. I've been told I need to earn $55,000 a year via the business to claim all the benefits, such as company car, phone, etc. is this true..?

3. How would tax and super contributions work..? I remember last time I had my ABN and was working as a Telemarketer, I'd have to fill out an Invoice booklet each week to get paid, although we'd give it to our manager who would process it somehow, this is where im not sure what to do.

Hi Sk3tchy,

1. You'll have to speak to your accountant about the best business structure, ie, whether sole trader or pty ltd structure.

2. Not sure where you got this information from...Check the ATOs website for Novated Leases for vehicles (Vehicles purchased under novated leases). Generally, in the 30% tax bracket, you'll only save the GST, obviously in higher tax brackets you'll save more tax.

Mobiles and laptops can be salary packaged basically tax free, Dell have a good calculator (Dell Salary Sacrifice Calculator) which gives a rough idea of what you'll save. You can put in the cost of a mobile as well, depending on what sort of Mobile Plan your on and the phone you want, you may be able to get it free on a plan.

3. Would be based on which structure you set up (see point 1). Superannuation contributions are tax deductible for a pty ltd business, there is some more information here (Super for the self-employed).

Cheers,

Dan

PS This is all general information, before making a taxation decision speak to your tax adviser, accountant or FPA registered Financial Planner.

Thanks for the reply.

Unfortunately I'm only 21, and don't really have an accountant. I've always done my own tax returns, and only invest in direct shares at the moment, so I don't really have a need for one, at least that I know of.

I guess firstly in relation to thinks like Company Cars, Mobiles etc. you basically claim them on the business and so essentially get 30% sometimes even 40% back on them. Salary Sacrifice as you said, and I think you somehow get reimbursed for the GST portion..?

What are the different types of structure I'd have to select from?

- Sole Trader
- PTY LTD

Have been mentioned so far, what are the differences..?

Hi Sk3tchy,

An accountant can help you maximise your legitimate tax deductions and lodge your return.

In regards to tax, there are two good things Offsets and Deductions.

Deductions will reduce your taxable income. Offsets reduce the actual amount of tax you pay (Ie, $100 of deductions will reduce your tax by $30 if your on a 30% Marginal Tax Rate [MTR] compared to $100 of offsets will reduce your tax by $100). Tax Offsets used to be called Tax Rebates.

Depending on how your business acquires a vehicle can also affect the tax, eg, if your business buys a vehicle it is a capital acquisition which can be depreciated over the useful lifetime of the vehicle vs if you leased a vehicle the whole cost is an expense to the business and hence all deductible (this is why it's really popular to rent properties, computers and other business assets and it's generally more cashflow efficient).

Not sure where you got the idea of GST being paid on SGC.

GST is a tax added to the Goods and Services you charge clients or customers, eg, if I charged a client a fee, we have to add 10% GST (which goes to the tax office).

SGC is Superannuation Guarantee Contributions which is compulsorily for Employers to pay on behalf of Employees (see Superannuation), this needs to be paid for employees which earn more than $450 per month ($5,400 pa which is inline with previous 0% tax rates, now the 0% tax bracket is $6,000).

For self-employed the options are a bit more flexible, when to pay and you can lump it up to reduce taxable income before the end of financial year.

Similarly to being employed, a deductible contribution will reduce a business or self-employed taxable income and only get taxed at the contributions tax rate of 15% (vs the business tax rate of 30% [this means you save 15%] or your MTR if your self-employed [up to 30% savings!!!]).

Sole traders mean that you are responsible and LIABLE for all of the business debts and profits which are taxed at your MTR.

A business structure means that the business is it's own entity. Also all profits are taxed at 30% compared (say on a profit of $30,000, tax $9,000) compared to a sole trader made $30,000 they only pay $3,960 ($0 to $6,000 tax free [if an Australian resident] and then 16.5% up to $30,000 [including Medicare Levy 16.5% x $24,000]).

You should read business.gov.au home page which can help you a bit more.

For business structures see Decide on a business structure

Cheers,

Dan

PS Before doing anything speak to your accountant!