Thursday, 19 Dec 2024
Running a business is all about managing workload, time and finances to accomplish pre-defined goals. It involves building a team of talented workers who abide by the protocols and policies while following the code of conduct of the industry. Financial competence is crucial for entrepreneurs because they have to deal with a significant volume of transactions, file income tax and build a cash reserve. Financial management is not just an internal matter. It is evaluated by the governing body to ensure adherence to federal and state laws.
Every business in the country is accountable to the Australian Taxation Office (ATO), which supervises the national tax system, superannuation, registry systems and foreign investment. It is the revenue collection agency of the federal government and is responsible for GST for all states and territories. Businesses must follow all regulations to contribute to the economy and become law-abiding entities. Here is how entrepreneurs can stay ATO-compliant with business finances. These tips can prevent mistakes that can lead to fines and punishments.
Australian businesses must get registered for Australian business number (ABN), tax file number (TFN), and goods and services tax (GST). The business name must be registered with the Australian Securities and Investments Commission (ASIC). Entities that are structured as a company must get the company registered as a separate legal entity with the ASIC. In addition, businesses have to register for Pay as you go (PAYG) withholding, fuel tax credits and fringe benefits tax.
Most entrepreneurs are unaware of these business tax registrations and often seek the assistance of professional bookkeepers in Melbourne to complete the job. They should also register for the licences and permits needed to operate legally and protect their unique products and intellectual property with registered trademarks.
All businesses are obligated to record every transaction related to their operations, taxes, super, and registrations. These include documentation of all incomings and outgoings, including cash-based transactions. They should maintain end-of-year documents that provide details of business debts and debtors. Entrepreneurs must preserve bank statements, fuel tax credit records, GST records, and employee contracts.
The ATO advocates preserving documents digitally to access historical data easily and reduce the risk of damage due to the wear and tear of paper bills. Business owners must have a backup of their financial records because of the growing number of cyber attacks in Victoria that lead to data breaches. The records must be safeguarded for five years, except for company and employee records, which must be preserved for seven years.
Businesses have to pay all applicable taxes that can be accurately calculated by Melbourne bookkeepers to avoid penalties. These include federal taxes, such as income tax, capital gains tax, fuel tax credits, luxury car tax, etc. They also have to pay state taxes, such as property tax and stamp duty. The applicable taxes are to be paid to the ATO along with the business activity statement and reports by the deadline. Business owners can save money on tax bills by claiming tax deductions for business expenses. However, they have to submit proof of these transactions.
Businesses with a workforce have to lodge payroll taxes, PAYG withholding, fringe benefits tax (FBT) and employment termination payments (ETP). The payroll tax is to be submitted to the State Revenue Office in Victoria and is calculated on the wages paid to the workers. The payroll tax rate from 1 July 2024 onwards stands at 4.85%. Business owners have to pay FBT if they offer certain benefits to their workers apart from their wages or in exchange, such as a business vehicle, discounted products, etc. They have to pay ETP when an employee is terminated or leaves the organisation.
One of the biggest challenges with financial management and compliance is accuracy and attention to detail. Entrepreneurs do not have the time to invest in tracking changes in tax legislation and analysing financial records. They need the reports to understand the performance of the entity and make data-driven decisions. They can reduce their burden by using software for bookkeeping in Melbourne that automates most of the tasks and makes financial management a cakewalk. These tools send invoices, create financial statements, calculate taxes, manage inventory, record transactions and monitor cash flow. In addition, the expertise of a professional bookkeeper ensures the data is assessed and tracked effectively to increase profitability and reduce wasteful activities.
Entrepreneurs have to find a complying super fund that accepts contributions and meets legal obligations. Employees should be given 28 days to choose a fund to allow the business to make super contributions. Employees who have an existing fund do not need to open a new super account. The business owner can request their stapled super fund from the ATO to pay the super guarantee contributions. If there is no stapled fund and the employee does not choose another one, the employer can pay to the default super fund. The bookkeepers in Melbourne can help to identify employees eligible for super.
ATO compliance is a must for businesses to maintain stability and financial competence. Using advanced tools and industry experts can help businesses stay on the right path and follow the regulations without errors.
