Setting Up in Business? Welcome to a New World of Taxation

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Tax Doesn't Need to be Complicated

If you are dreading the end of the tax year, you are not alone. Every year, thousands of self-employed people worry about filling out and filing their tax returns. I used to be one of those people but not anymore. Everything changed when I was introduced to a guy who works for a tax service. He offered to take a look at my accounts. Once he had taken a look, he recommended several things I could do to reduce my tax bill. I was really happy about this so I hired him and asked him to look after my taxes.

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Setting Up in Business? Welcome to a New World of Taxation

9 August 2018
 Categories: , Blog

More people than ever have decided to strike out on their own and become self-employed to try and safeguard a future for themselves and their families. Of course, this presents many a challenge even though it is an exciting proposition, and one of the biggest hurdles for a new entrepreneur will involve taxation. If you're just embarking on this journey, you may have been used to paying tax as an employee, but this was normally handled by your boss, and things will be very different now. Tax is now a much bigger topic for you, so what do you need to be aware of?

You're the Tax Collector

Firstly, you will need to charge tax on your sales, collect it and send it to the government. This is known as 'goods and services tax' and is something that applies to most situations. Usually, you will not be required to register for this tax until your gross sales pass a certain threshold, although you can do this voluntarily if you want to. You will be able to claim back tax that you incur as you buy in materials for your business and will then send the net amount to the government. Get used to including GST on any invoices that you send to your customers.

Regular Statements

GST will be accounted for on a BAS. Yet another acronym, the 'business activity statement' is essentially a summary of your situation for the previous quarter. Some businesses will have to send this in every month if they are of a certain size or type, especially if they import goods as part of their operation. If your business is smaller and you have registered for GST voluntarily, though, you may be able to send the statement in once per year.

Employment Taxes

If you intend to add staff to your business, you will have to withhold taxes from their pay check (known as 'pay as you go') and send this in with your business activity statement. The government is very strict on this element of collection, and you will have to keep up with your submissions or risk a punitive fine.

Understanding the Challenge

Many small business owners underestimate the work involved with proper tax calculation. They may not know if they can claim GST for certain types of expenditure—for example, some advertising expenses are not allowable. Consequently, it's a good idea to engage a tax accountant from day one to avoid running into any trouble.