Finance

Setting up your finances correctly from the start is not just good accounting - it is a legal requirement. In Australia, every business has tax registration, reporting, and record-keeping obligations that carry real penalties if you get them wrong. The ATO does not treat ignorance as an excuse, and the costs of untangling years of poor financial setup can dwarf the cost of getting it right in the first place.

This chapter walks through the core financial and tax obligations that apply to most Australian startups and small businesses. It is not a substitute for advice from a registered tax agent or accountant, but it will give you a practical framework so you know what questions to ask and what to set up before you start trading.

An Australian Business Number (ABN) is an 11-digit identifier that your business uses in dealings with the ATO and other government agencies. You need an ABN if you are carrying on a business in Australia, regardless of whether you operate as a sole trader, partnership, trust, or company.

Applying for an ABN is free through the Australian Business Register. You can typically get one within minutes if your identity has already been verified with the ATO. Be aware that if you register as a company, you will also receive an Australian Company Number (ACN) through ASIC as part of the company registration process.

When You Need an ABN

You need an ABN if you are carrying on an enterprise - meaning a business activity conducted on a regular or continuous basis with a reasonable expectation of profit. One-off sales of personal items or occasional hobby activities do not require an ABN. However, if other businesses are paying you for services, they will generally withhold 47% of your payment under the no-ABN withholding rules unless you quote a valid ABN on your invoices.

Business Name Registration

If you trade under a name other than your own personal name (for sole traders) or your registered company name, you must register a business name with ASIC and pay the current registration fee. This can be done through the Australian Business Register at the same time you apply for your ABN. Note that registering a business name does not give you trade mark rights - see the intellectual property chapter for that.

The Goods and Services Tax (GST) is a broad-based 10% tax on most goods, services, and other items sold or consumed in Australia. If your business has a GST turnover (gross income minus GST) of $75,000 or more per year, you must register for GST. For non-profit organisations, the threshold is $150,000. You can also choose to register voluntarily below the threshold, which can be advantageous if you want to claim input tax credits on your purchases.

Charging GST

Once registered, you must charge GST on most taxable supplies and issue tax invoices that comply with ATO requirements. Some supplies are GST-free (such as basic food, certain health services, and exports) or input-taxed (such as financial supplies and residential rent). You need to understand which category your goods or services fall into so you charge correctly.

Business Activity Statements (BAS)

If you are registered for GST, you must lodge a Business Activity Statement (BAS) - typically quarterly, though some businesses lodge monthly or annually depending on turnover. The BAS reports your GST collected on sales, GST paid on purchases, PAYG withholding, and PAYG instalments. Your BAS is generally due 28 days after the end of each quarter.

If you have employees (or pay certain contractors who do not quote an ABN), you must register for Pay As You Go (PAYG) withholding. This means you withhold amounts from payments to your workers and send that money to the ATO, where it is credited against the worker's income tax liability.

Employer Obligations

As an employer, you must calculate the correct withholding amount using ATO tax tables, report and pay withheld amounts through your BAS (usually quarterly), and provide payment summaries to employees by 14 July each year. Since 2019, most employers are required to report payroll information through Single Touch Payroll (STP), which reports salary, wages, PAYG withholding, and superannuation information to the ATO each pay cycle. If you use payroll software such as Xero, MYOB, or QuickBooks, STP reporting is generally handled automatically.

Voluntary Agreements

In some situations, a contractor may enter into a voluntary agreement with you to have PAYG amounts withheld from their payments. This is common where the contractor prefers to spread their tax obligation throughout the year rather than paying a lump sum at tax time.

Superannuation is Australia's compulsory retirement savings system. If you employ anyone, you will almost certainly have super obligations.

Super Guarantee

As of the 2025-26 financial year, you must pay a super guarantee rate of 11.5%of an employee's ordinary time earnings into their nominated super fund. This rate is legislated to increase to 12% from 1 July 2026. The previous $450 per month minimum earnings threshold was removed from 1 July 2022, which means you owe super on the first dollar earned - regardless of how few hours the employee works.

Choice of Fund

Employees have the right to choose which super fund their contributions go to. If an employee does not make a choice, you must pay their super into a stapled super fund- the existing fund linked to that employee through the ATO. If no stapled fund exists, you pay into your business's default fund, which must be a MySuper product.

Payment Deadlines

Super contributions must be received by the employee's fund by the 28th day after the end of each quarter. Late payments attract the super guarantee charge (SGC), which includes the super shortfall, an interest component (currently 10%), and an administration fee. The SGC is not tax deductible, making it significantly more expensive than paying on time.

If your business is structured as a company, it pays company tax on its taxable income. The current rates are:

• 25% base rate - applies to base rate entities, which are companies with an aggregated turnover of less than $50 million and no more than 80% of their assessable income from base rate entity passive income.
• 30% standard rate - applies to all other companies.

Most startups and small businesses will qualify for the 25% base rate. You lodge a company tax return annually, and any tax payable is generally due on the date specified in your notice of assessment.

Small Business Tax Offsets

If you are a sole trader or partnership (not a company), you may be eligible for the small business income tax offset, which provides a tax discount of up to 16% of the income tax payable on your business income, capped at $1,000 per year. This offset applies to individuals with business income from a small business entity with aggregated turnover under $5 million.

The ATO requires all businesses to keep records that explain their tax affairs. This is not optional. Poor record keeping is one of the most common triggers for ATO compliance activity, and it makes it much harder to defend your position if you are audited.

What to Keep

At a minimum, you must keep records of all income and expenses, bank statements, invoices and receipts, employee and contractor payment records, BAS working papers, asset purchases and depreciation schedules, and stocktake records if you carry inventory. Records must be in English (or easily convertible to English) and must explain all transactions.

Retention Period

Most business records must be kept for five years from when they were prepared or the relevant transaction occurred, whichever is later. Some records - such as those relating to capital gains on assets acquired before 20 September 1985 - must be kept indefinitely.

Digital Record Keeping

The ATO accepts digital records provided they are a true and clear copy of the original, are stored in a way that prevents alteration, and are accessible and readable. Cloud accounting software such as Xero, MYOB, or QuickBooks satisfies these requirements and has the added benefit of automated backups. If you store paper receipts digitally, the ATO allows you to destroy the paper original once a compliant digital copy exists.

If you are registered for GST and make a taxable sale of more than $82.50 (including GST), you must provide a tax invoice within 28 days of a request from the buyer.

Tax Invoice Requirements

A valid tax invoice must include the words "tax invoice" stated prominently, the seller's identity (name or business name) and ABN, the date of issue, a description of the items sold (including quantity and price), the GST amount (either shown separately or as a statement that the total price includes GST), and the buyer's identity and ABN for sales of $1,000 or more.

Electronic Invoicing

The Australian Government is encouraging adoption of Peppol e-invoicing, a standardised electronic invoicing framework that allows businesses to send and receive invoices directly between accounting systems. While e-invoicing is not yet mandatory for most private businesses, it is already required for Commonwealth Government agencies and is expected to become more widespread. If your accounting software supports Peppol, enabling it now can save you time and reduce errors.

At some point, most startups need external funding - whether from friends and family, angel investors, venture capital, or government grants. The financial and legal considerations around raising capital are significant. Issuing shares triggers obligations under the Corporations Act 2001(Cth), and getting your cap table, shareholders' agreement, and disclosure requirements right from the outset saves enormous pain later.

Raising capital also overlaps with your company structure and co-founder arrangements. If you are approaching investors, read this chapter alongside the business structure chapter and the business partners chapter, and get your term sheet, SAFE note, or shareholders agreement reviewed before you start conversations.