COMPLY WITH REGULATORY, TAXATION AND INSURANCE REQUIREMENTS FOR THE MICRO BUSINESS

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1 COMPLY WITH REGULATORY, TAXATION AND INSURANCE REQUIREMENTS FOR THE MICRO BUSINESS UNIT BSBSMB305A This unit describes the performance outcomes, skills and knowledge required to outline the regulatory, taxation and insurance compliance requirements for a micro business; and to source advice and specialist services to assist business owners/managers in satisfying these requirements and needs. KEY CONCEPTS Business ownership structures Business name Legal requirements and implications Agreements, permits and licences The protection of intellectual property Australian taxation principles and requirements GST requirements Pay As You Go tax system Business deductions Permits and restrictions impacting on a business Operating a business from home Insurance Contract law Contract negotiation 1 1

2 CHAPTER 1 THE LEGAL STRUCTURE OF YOUR BUSINESS BUSINESS OWNERSHIP STRUCTURES One of the important decisions you must make regarding your business is its legal structure. The most common types of business structure available in Australia include: 1. Sole proprietor/trader 2. Partnerships 3. Companies 4. Trusts. Your choice of the most appropriate legal form of organisation for your business will depend upon factors such as: the size of the business the number of people involved the type of business the cost and difficulty of establishment taxation considerations maximum economic rewards financial considerations, both present and future superannuation considerations management control and independence acceptability of government interference the need for additional skills exposure to risk/liability of individuals your own personal preference. 1. SOLE PROPRIETOR/TRADER A sole trader is one who trades as an individual, without the use of a company structure or partners. The proprietor is the sole owner of the business and has complete control over it. Therefore, the individual bears the full responsibility for the actions of the business. This is the simplest form of business ownership and can be commenced with little financial outlay. The sole trader can trade under their own name, or register a business name. However, registration of a business name does not make the sole trader a separate legal entity. The business belongs to the sole trader who is personally responsible in law. Registration under a business name has no legal implications other than to allow that individual to use and trade under that name. A distinguishing feature of the sole trader is the nature of any legal liability. While the sole proprietor retains the profits from the venture, the liabilities with regard to claims from creditors extend to private assets. No distinction is made between business assets and private assets. 3 3

3 Chapter 1: The Legal Structure of Your Business date of commencement name and address of each person carrying on the business. It is advisable to have at least two alternative names in mind in the event that your preferred name is not accepted. 3. You will be issued with a Certificate of Registration. This can generally be done on the spot. Martha s Kitchen?? Martha s Home-cooked Foods?? Just Like Grandma Used to Make?? 12 12

4 FIGURE 2.4: TAX INVOICE FOR SALES OF LESS THAN $1,000 The Australian Business Number of the supplier The GST-inclusive price of the taxable sale The words tax invoice stated prominently The date of issue of the tax invoice The name of the supplier A brief description of each thing supplied When GST payable is exactly 1/11th of the total price, either a statement along the lines of the total price includes GST, or the GST amount. FIGURE 2.5: TAX INVOICE FOR SALES OF $1,000 OR MORE A 53 53

5 MOTOR VEHICLE EXPENSES Self-employed persons are required to prove their claims for motor vehicle expenses, if their motor vehicle is a motor car, station wagon, panel van, utility or similar vehicle, or other road vehicle designed to carry less than one tonne or fewer than nine passengers. Even if your vehicle fits one of the categories listed above, the following rules for proving claims will not apply if your vehicle is: a taxi, panel van, utility or other non-passenger commercial vehicle used only for business purposes and for travelling between home and work. a car that is unregistered throughout the whole of the income year and used principally for business purposes. Claims for such vehicles and other types of business vehicles, for example, vans, larger utilities and trucks, should be based on your actual expenditure on the vehicle, for example, costs of registration, insurance, repairs, fuel, oil, interest or lease fees, and so on. No other records need be kept. Methods of claiming car expenses If your vehicle is one which requires you to prove your claim for motor vehicle expenses, you may choose from one of four methods to calculate your claim. (i) Rate per kilometre method: This method can be used if you do 5,000 business kilometres or less. Records you need to keep are: engine capacity in cubic centimetres how you calculated the kilometres travelled. The amount you can claim depends on the size of your car s engine. Check with the ATO for rate

[ 16-310] DEDUCTIBLE MOTOR VEHICLE EXPENSES

Premium Master Tax Guide 1 [ 16-310] DEDUCTIBLE MOTOR VEHICLE EXPENSES Motor vehicle expenses incurred in the course of deriving assessable income or in carrying on business are allowable deductions (ITAA97