Ready for Business? Your Plain-English Guide to Starting a Business in Australia
Starting your own business is exciting — but between ABNs, GST, business structures and record keeping, it's easy to feel overwhelmed before you've made your first sale. The good news? Getting your tax and super right from day one is much simpler when you know what to expect.
We've pulled together the key things the ATO wants every new business owner to know, explained in plain English.
First Things First: Are You Actually "In Business"?
Not everything that makes money counts as a business in the eyes of the ATO. This matters, because being in business changes what you need to register for, what records you must keep, and how you're taxed.
Generally, you're in business when you're carrying out continuous, repeated activities with the aim of making a profit. That profit doesn't have to be cash — it could come through bartering goods or services too.
You're probably not in business if your activity is:
A genuine hobby with no profit motive
Work you do as an employee
A passive investment (like shares you hold for dividends, or a rental property managed by an agent)
A true one-off transaction
Watch out for the hobby-to-business tipping point. A classic example: you start posting how-to videos online for fun, then begin monetising the channel, buying equipment, advertising, setting a content schedule and tracking expenses. At that point, your "side hustle" has likely become a business — with tax obligations to match.
Signs you've crossed into business territory include:
You intend to make a profit, and your activity is big enough to realistically do so
Your activities are repeated and ongoing
You operate in a business-like way — keeping records, advertising to the public, holding licences, using a separate bank account, or having a business plan or ABN
Tip: Knowing when your business officially starts is just as important. Your start date affects which registrations you need, when deductions kick in, and which concessions you can access. Your business generally starts once you've made the decision, acquired the minimum assets needed, and actually begun trading activities. And if your circumstances change in a big way — say a hobby starts earning money — you need to reassess.
Before You Launch: Do Your Homework
Research and planning are the difference between a strong start and an expensive lesson. Before opening the doors:
Talk to people who've done it — other business owners, your industry association, or a trusted adviser
Speak with a registered tax professional (that's where we come in!)
Check the ATO's small business benchmarks to see how businesses in your industry typically perform
Crunch the numbers — what will it cost to start and run the business, and could grants or loans help?
Choose your business structure carefully — it determines how you will pay tax (more on this below)
Understand your record-keeping and registration obligations from day one
The Registrations You May Need
Once you're in business, certain registrations come into play:
ABN (Australian Business Number) — the 11-digit number that identifies your business to government and customers
GST — registration is compulsory once your annual turnover hits $75,000 (or $150,000 for not-for-profits), or immediately if you provide taxi, limousine or ride-sourcing services, or want to claim fuel tax credits
PAYG withholding — required before you pay your first employee
Fringe benefits tax (FBT) — if you provide perks to staff on top of wages
Licences, permits and business insurance relevant to your industry
If you're registered for GST, you'll also need to lodge business activity statements (BAS).
Choosing Your Business Structure
This is one of the biggest decisions you'll make, because it affects your tax, your paperwork and your personal liability. The four common structures in Australia are:
Sole Trader
The simplest and cheapest option. You run the business as an individual, report business income in your personal tax return (no separate business return), and pay tax at your individual rate. The catch: you're personally responsible for all debts and losses. You can employ staff — and must pay their super — but you can't employ yourself. You can, however, make personal super contributions and may claim a deduction for them.
Partnership
Two or more people running a business together and sharing the income or losses. The partnership lodges its own return and has its own TFN and ABN, but it doesn't pay tax itself — each partner pays tax on their share in their personal return. A written partnership agreement isn't legally required, but it's a very smart idea: without one, profits and losses are split equally, and disputes get messy fast.
Company
A separate legal entity, owned by shareholders and run by directors. The company pays tax at the company rate, lodges its own return, and the money it earns belongs to the company — not to you personally. Companies offer some asset protection, but directors can still be personally liable in certain situations (including for some tax and super debts). Every director needs a director ID, and set-up and admin costs are higher than other structures. Be careful using company money or assets for personal purposes — there can be tax consequences.
Trust
A trustee (a person or company) holds and manages assets for the benefit of beneficiaries, usually under a trust deed. The trust lodges its own return showing how income was distributed, and generally the beneficiaries pay tax on what they receive. Trust losses can't be passed on to beneficiaries, though the trust may carry them forward against future income.
Not sure which structure fits? This is exactly the kind of decision worth getting professional advice on — changing structures later can come with costs and tax implications.
Good Habits That Set You Up for Success
The ATO's own research shows most small businesses try to do the right thing — they just make mistakes. The businesses that thrive tend to get four basics right:
1. Use digital tools
Accounting software, eInvoicing, electronic payment systems and the ATO's online services save time, cut errors, and make reporting far easier. Bonus: the business portion of digital product costs is generally tax deductible. (One warning — payment software must never include sales suppression tools, which are banned.)
2. Keep good records
Accurate, complete records of every transaction are non-negotiable. They're required for tax purposes, but they also give you a clear picture of your business's health and make BAS and tax time painless.
3. Open a separate business bank account
Compulsory for partnerships, companies and trusts. Optional for sole traders — but strongly recommended. Untangling personal and business spending at tax time is nobody's idea of fun.
4. Manage your cash flow
Know what's coming in and going out. Crucially, set aside money for GST, PAYG withholding and super as you go, so the funds are there when it's time to pay. In your first year, consider tax pre-payments or voluntary PAYG instalments so your first tax bill doesn't catch you off guard.
Lodge and Pay On Time — Or Ask for Help Early
Late lodgments can attract penalties, and overdue tax debts accrue general interest charges that compound daily. If you're worried you can't lodge or pay on time, don't wait — contact the ATO or your tax agent before the due date. Payment plans and other support options are often available, and acting early keeps your options open.
Hiring Your First Employee?
Before your first hire, you'll need to:
Set up Single Touch Payroll (STP)
Register for PAYG withholding
Be ready to pay super guarantee into your worker's chosen fund
Register for FBT if you'll provide extra benefits
Check whether state payroll tax applies to you
Support Is Out There
You don't have to figure it all out alone. Help is available through the ATO's small business newsroom, free online courses, calculators and tools, the National Tax Clinic program for those who can't afford professional advice, and of course, a registered tax agent can take the guesswork out of the whole process.
The Bottom Line
Getting your business off to a strong start comes down to a few key moves: confirm you're actually in business, pick the right structure, sort your registrations, keep great records, and put money aside for tax and super from the very first dollar.