Remember alphabet soup when you were growing up? That mash of letters in a tomatoey soup? I remember trying to make words out of the letters and trying to find all the letters that make up my name. There are certainly times that I look at all the acronyms associated with tax and small business ownership and I feel like it’s a regular ol’ mashup of letters and trying to make a word out of it is like battling with a bad hand in Scrabble.
You know the ones – ABN, ACN, BAS, GST, PAYGW, PAYGI, etc etc. It certainly seems like another language and often it’s not quite that clearly explained what you need, what they are and how to apply them. And if you’re dealing with a bookkeeper or accountant, then they’re probably throwing them around willy-nilly to confuse the issue. Not that we mean to, it’s just we use them every day and forget that not everyone does!
So, here’s a quick crash course in what they are and how they may mean something to you!
The first one you’ll hear as you start down the business ownership road is the ABN and the ACN. The ACN is your Australian Company Number and you’ll have to have one of those if you’ve registered as a company. One will be issued for you.
The ABN is the Australian Business Number and anyone, a sole trader, partnership, company, trust; that intends to carry on a business enterprise and have dealings with the ATO will need one of these. They are relatively straight forward to apply for with the Australian Business Register (ABR) on www.abr.gov.au. Another acronym for you! While you’ve got your application in for that you can tick a box for them to issue you with a TFN – Tax File Number- so you can lodge your tax.
Three down, about 70 million more to go!
Ok, you’re registered for business and trading! The next step is: do you need to be registered for GST and if so, when is the next BAS due?
GST is the 10% Goods and Services Tax that you need to pay if you are going to be making more than $75 000 in a 12month period. Your BAS is your Business Activity Statement, which pulls together all your incomings and outgoings for the month, basically all your business activity. (More on this to follow in a later article).
On your BAS you’re going to report things like your GST that you’ve charged customers, and the GST you’ve paid to suppliers. You’re also going to report a variety of PAYG payments. PAYG stands for Pay As You Go, and there are 2 main ones. PAYGW is the tax that you withhold from your employee’s gross salary and then pay directly to the ATO. That’s why is called Pay As You Go Withholding. The 2nd one is PAYGI, and that is your Pay As You Go Instalment, which is an instalment for your income tax that the ATO (another one!) will sometimes calculate based on your past tax returns and it is an instalment to pay towards the end of year tax return separate from the BAS. You can elect to pay this quarterly if you like to so that you’re not slapped with a massive bill at the end of the year.
The ATO is our Australian Taxation Office and is the Grandmaster of Acronyms. The only thing with more abbreviations is a teenager’s text message.
Have I missed something? I’m sure I have! Your bookkeeper can often be a massive help to try and understand all these terms and it’s a great idea to have a sit down with them and go over it. Haven’t got a bookkeeper yet but you’re thinking of one? Head back to the website and see what we offer, and drop us a line for a no-obligation chat!
CU next time!