The ATO is restarting its debt collection and audit processes. Here’s what it means.

The tax and financial requirements for running a business can get overwhelming. What is an ABN? Do I need one? What is GST? When do I need to register? How does this all affect my business?

Our Director, Michael Mekhitarian answers some of the  questions around ABNs and GST.

What is an ABN?

The ABN is an Australian Business Number issued by the Australian Tax Office.

It is a unique 11-digit number that makes it easier for businesses and government to interact.

Do I need an ABN?

Michael says “if you’re conducting a business in Australia you need to have an ABN.”

An ABN will confirm your business identity to others when ordering and invoicing, it will allow you to operate in the GST system, avoid PAYG tax on payments you receive and connect online with government agencies.

How do I register for an ABN?

You can register for an ABN online through the Australian Business Register or through a registered tax or BAS agent.

Does an ABN cost anything?

There is no cost for an ABN. However if you use the services of a professional to register the ABN for you, they may charge a fee for their services.

What do I do with my ABN?

If you invoice other businesses for services more than $75, your ABN should be included on your invoices.

If you don’t include it, the other business must withhold 47% from any payment they make to you and send the amount to the ATO.

What is GST?

Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.

“Not all goods and services provided in Australia have GST, for example fresh food is GST free and some medical services are GST free” says Michael.

“Depending on what you do and what type of business you own, you need to have a good look at whether you need to charge GST. “

When do you need to register for GST?

When you start your business, if you think you’ll reach the GST threshold of $75K then you should register your business for GST when you apply for your ABN. You only register once for GST, even if you operate more than one business.

Michael says “If your turnover is $75,000 (or you think you’re going to have turnover of $75,000) as a business or $150,000 as a not for profit you are then obliged to register for GST.”

“That means at that point of time, your invoices need to have 10% added to the cost.“

How do I register for GST?

You can register for GST when you apply for your ABN with the ATO.

If you don’t register for GST initially and you find you are close to reaching the GST turnover threshold, Michael says “that’s something you go through the Australian Tax Office and switch your ABN to being registered for GST”.

Can I change to register for GST?

If you didn’t register for GST initially, check your accounts each month to see if you’re close to the threshold. You can update your ABN to indicate your GST status with the ATO.

If you are close or go over the threshold, you’re required to register for GST within 21 days.

What do I have to do if I have to register for GST?

1. Register for GST
2. Determine if your sales are GST, GST-free or input-taxed
3. Issue Tax invoices
4. Obtain Tax invoices
5. Claim GST credits
6. Account for GST
7. Lodge Activity Statements

What happens if I don’t register for GST?

You may be required to pay GST on any sales/invoices you’ve made since the day you reached the threshold, even if you didn’t charge GST on those sales/invoices.

You may also have to pay penalties and interest.

Tax Invoices

Once you’re registered for GST, you need to provide a “Tax Invoice” to your customers.

Michael says “A tax invoice must include the words ‘Tax Invoice’, it has to include your ABN and the name of your business and it must have the price including GST on it. And if the invoice is for over $1000, you must also include the purchasers details and line items showing the GST.”

“The good news is that these sort of things can be set up in Xero, and once you do that then it just happens automatically.”

We’re here to help you through the process

ATB Chartered Accountants are experienced tax professionals, we can assist you in registering your ABN and help determine if you need to register for GST.

Contact us today for a discussion on how to set your business up for the future.

ATB Partners are cloud based accounting software  specialists, having moved to a paperless environment more than 20 years ago.

Improving our clients systems and processes is top of mind for ATB Partners and providing customised accounting software to meet our client’s needs is at the core of our values.

What is Xero?

Xero is a cloud based accounting software for small to medium businesses.

You can use Xero to manage invoicing, bank reconciliation, bookkeeping & much much more.

What are add-ons?

Add-ons are customised modules that add specific functionality to your Xero platform.

Xero is a high quality accounting system in its own right, however these add-ons have been specifically developed for Xero, and are fully integrated into the Xero platform to extend its functionality.

ATB Partners Director Michael Mekhitarian says “Xero has an incredible range of add-on software apps in the Xero Add-on Partners network. They include a variety of CRM’s (Customer Relationships Manager), Transport, Logistics, Inventory, Receipt Bank, Scheduling, Cash Flow Forecasting apps and many more.”

Xero’s library of add-ons

Xero has over 600+ add-ons in their library, they enable businesses to address certain aspects of their business that are unique to them, such as inventory management, POS software, automated creditor modules such as receipt bank.

Things like payment facilities like Square or PayPal, CRMs or marketing tools like Salesforce, e-commerce modules, payroll and HR such as Smart Payroll, Employment Hero.

Michael says “some are top tier, some are lighter, but the point is that when you’re in the Xero eco system, you are not restricted by the Xero architecture.”

For example…trades businesses

There’s a multitude of 3rd party programs that are specifically built towards industries. For example, simPro and WorkflowMax are designed for trades businesses.

Xero’s out of the box solution has the ability to manage payroll you would use an add-on to manage 3rd party contractors, specifically in the detail of creating a project with milestones.

Michael says “in some cases you need more that the base Xero product, if you’re running a larger construction or trades business, Simpro can enable you to drive efficiencies in your business.”

Customised for your business

Michael says “so these add-ons deal with a particular issue that is important to you.”

You can have multiple warehouses or multiple brands, or with e commerce, you can link websites with ecommerce facilities directly to your Xero file.

“POS like Bend and Square, when you’re with them it pushes it all in to Xero. Square means you can take a payment on the spot when you provide a service, it has open APIs, so integration with other software is two ways mostly, push and pull.”

Seamless integration

Michael says you can “provide quotes, lock in pricing for materials to prepare a proper quote and then push it in to Xero for ordering.

“Real efficiencies driven in to a business. It’s bringing enterprise style software in to small business.”

Unlimited options

The add-ons are not limited, as they grow, the efficiencies allow your business to grow quicker. Michael says that’s “a huge advantage.”

“For example we’re working with a client who uses inventory management with multiple warehouses that need to transfer between them, and track what’s where. You need a software system that is quite sophisticated in inventory.”

“There’s a Xero add-on called Unleashed that will do the invoicing of stock, then that info gets synced to Xero and the financial management then happens out of Xero.”

Support for Add-ons

The suppliers of add-ons have support teams and there’s usually a range of support options.

Michael recommends that clients “come to ATB Chartered Accountants with their requirements initially”.

ATB Chartered Accountants look at best add-on options available, we have great relationships with the individual providers, and can choose one that best meets our clients needs.

Michael says “add-ons are fantastic things, when set up and run properly, business owners can manage all the details of their business.”

How ATB can help customise Xero

ATB are proud Gold Partners with Xero, our team works in partnership with our clients to get the most out of the cutting edge, cloud based accounting software. In his article, our Director Michael Mekhitarian explains some of the ways clients can benefit and add value to their business by moving to Xero.

Fast-track and simplify for success

As your pro-active accountant, we understand your business and we have a solid business model in place for growth and success.

Add value to your business by fast-tracking and simplifying your business processes.

Take it to the next level

We can help by advising, implementing and integrating these apps with Xero to really take your business to the next level.

Contact ATB Chartered Accountants to expand your opportunities.

To many, the legal record keeping requirements can be extremely burdensome. But it doesn’t have to be that way. With a carefully planned strategy and effective communication with your tax accountant, you can ease the pain of having to keep detailed records of your business accounts. If you’re struggling to breathe under the immense weight of receipts, invoices, pay slips and superannuation documents, let us lend a helping hand.

Where do I start?

Your business accounting systems will need to support the type and size of business you have. If you are a sole trader, simple systems might suffice, however as you grow or if you’ve got a larger business you’ll need to have more advanced systems.

Contact ATB Chartered Accountants who can help you find the right cloud-based accounting software for your tax filing and records management needs.

Simple tax affairs

In most cases, you need to maintain legible records of all documents relating to the operation of your business from the last five years. However, the necessary duration may vary given your circumstances. In fact, if you’re filing an individual tax return you may fall into the category of simple tax affairs. And as a result, some records you may only need to maintain for two years.

Legal Record Keeping Requirements for Business Owners

Do I qualify for simple tax affairs?

To qualify as a simple tax lodger, your income must only consist of a salary or wage, interest paid by a bank or government institution, or dividends from a company listed on the ASX. You must also be only claiming deductions on some specific items.

To find out if you qualify for the simple tax affairs system, contact one of our tax professionals for a consultation.

Legal Record Keeping Requirements for Business Owners

What records should I keep?

As a rule, if you’re unsure as to whether you need to keep a particular record, keep it anyway. When it comes to the ATO, it is always better to be safe than sorry.

The key types of document that you must maintain records of include any and all payments you’ve received, expenses that you’ve occurred that are relevant to the operation of the business and paperwork related any transfer, purchase or sale of assets. The lesser known record types include any donations you’ve made and all medical expenses incurred by any family members listed on your Australian tax forms.

Legal Record Keeping Requirements for Business Owners

Keep them safe…

We would recommend having cloud-based accounting systems that have regular automated backups. However, if you have local backups or paper records, we highly recommend that you keep your records in a fire-safe box and undertake the necessary precautions to ensure that you have them copied or backed up.

In the case that a record has been destroyed, being able to prove that you took every possible precaution to maintain the record will be extremely useful in making your case with the ATO.

Legal Record Keeping Requirements for Business Owners

Cash or Cheque?

For those businesses operating predominantly in the cash economy, you need to be extremely careful. While it isn’t advertised, cash dominant businesses are often more heavily scrutinized by the ATO, as it is easier to engage in deliberate non-compliance.

Although it may be tempting, you must report all cash transactions and wages paid in cash. Often business will deliberately hide income to avoid paying superannuation and tax. To fight this unfair advantage, the ATO can apply harsh penalties to businesses caught operating ‘off-the-books’. Such a fine could cripple your business for years to come. Trust us, you don’t want to risk it.

In most cases, the ATO will not immediately punish a business that is deemed to have the right intentions. If you’re unsure whether you’re recording your cash transactions legally, it is critical that you get in touch with a tax professional as soon as possible. And if you are found to be deliberately breaking the law, you may be fined on the spot.

Experienced Tax Professionals

Tax is complex – let us do it for you, so you can be sure in the knowledge that your financial records comply with tax legislation. Contact ATB Chartered Accountants now.