If the pandemic has shown us one thing, it’s that things can change quickly, and not always for the good. However, the last 18 months have given us all the chance to evaluate everything from where we live to who we work for. And as a result, many more Aussies are looking to work for themselves and looking at the cost of setting up a company in Australia.
If this is you and you’ve decided to take that great idea from notes on a piece of paper to a living, breathing entity, good on you. However, before you get ahead of yourself, you need to set-up the foundations of your new empire and that starts with setting up a company. Let’s get started with the key things you need to know.
The cost of setting up a company
If you are setting up a company there are mandatory costs associated with registering a business in Australia. Although there’s no fee for obtaining an ABN (Australian Business Number) or to lodge a TFN application, you will need to pay a fee to register as a company and to obtain a business name. You can register as a company for a fee of $506 (for a proprietary limited company), while obtaining a business name costs $37 for 1 year or $87 for 3 years.
ABN, ACN, TFN ...say what?
Unlike LOL, YOLO etc, ABN, ACN and TFN aren’t acronyms used by millennials on WhatsApp, but important components of setting up and running a business in Australia. Let’s take a quick look at them:
ABN - Australian Business Number
An ABN is a unique 11 digit number that identifies your business to the government and community. You can use an ABN amongst other things, to: Identify your business to others when ordering and invoicing, claim goods and services tax (GST) credits and much more.
ACN - Australian Company Number
An Australian Company Number (ACN) is issued specifically if and when you register your business as a company. Your ACN is a 9-digit number that is issued by the Australian Securities and Investments Commission (ASIC). Your ACN will serve as an identifier to ASIC for the monitoring of your company activities. It also lets the public know your business’s structure.
Company structures are separate legal entities, meaning that directors will not ordinarily be responsible if the company gets into financial or legal trouble.
TFN - Tax File Number
A tax file number (TFN) is free and identifies you for tax and superannuation purposes. It’s yours for life. You keep the same TFN even if you change your name, change jobs, move interstate, or go overseas.
Do I need an ABN if I'm setting up a business?
It’s not mandatory for a business to have an Australian business number (ABN), but there are a few good reasons why you should. Foremost among them will be that without one, your business will feel a whole lot poorer than it should.
Other businesses that deal with you are legally bound to withhold tax from any payments they make to you if your business does not quote an ABN on invoices – and they must withhold it at a rate of 47%.
Having an ABN also gives your business the ability to claim back goods and services tax (GST) credits, register to use the pay-as-you-go withholding system, be able to offer fringe benefits to employees, and just generally make dealing with other businesses much smoother.
If your turnover is more than $75,000 a year (before GST), you are required to register for GST, and to do that you need an ABN. (Taxi drivers need to be in the GST system no matter what.)
Will I need more than one ABN?
Every business that applies for an ABN only needs one (whether sole trader, partnership, company, or trust) but can then run as many enterprises as they like from the one ABN – but if any of these operations are run by a different business entity, a separate ABN will be needed for it.
What information is required to register a company?
Before you begin the online application form to register your new company, you must ensure that you have the following information at the ready:
- A company name
- A registered office address – this must be a physical street address, not a PO BOX, to where ASIC will send specific notices and on some occasions deliver service documents in person
- Place of business address – often the same as the registered office address. Again, must be a physical street address.
- Director/Secretary details – full name, residential address, date, and place of birth. At least one director must reside within Australia.
- Shareholder details – Full name/company name (can be individual or company), residential address, share distribution.
Does the state in which I register my company matter?
The short answer is YES! During your application to register your business you will be asked to select a state or territory in which your company will be registered. This refers to the legal jurisdiction within which your company will function.
Once you select the state or territory you must observe the legislation, regulations, and legal principles of the state. Whichever you choose your company will have legal capacity and powers in and outside this jurisdiction.
You can change your registered jurisdiction at a later stage but this can be time consuming. Key stages include:
- Conduct a shareholders meeting to propose the resolution.
- Submit a Form 205 – Notice of Resolution with ASIC 14 days after the meeting.
- It is necessary to obtain ministerial consent (from the minister in your current jurisdiction) to effect a change of jurisdiction pursuant to the Corporations Act 2001 (Cth) s 119A(3)(a)(i). In your application to the minister, you will need to include your annual turnover, total assets, and an explanation of why you would like to change jurisdictions.
- You must complete Form 2213 – Application for change of State or Territory of registration of a company and lodge this with ASIC along with your approval letter. There is a $495 fee attached to this transaction.
This process is not a quick one. It can take several weeks to obtain ministerial approval. It will usually take an additional 28 days upon lodgement of Form 2213 with ASIC for the jurisdictional change to take effect.
Another thing to consider about which state you register your business in is the state government grants you may be eligible.
How long does it take to register a company?
The company registration form takes around 15 minutes to complete. Once submitted, the company will usually be registered within 2-3 mins.
The only exception to this timeframe is where ASIC needs to manually review your company name. It can take ASIC up to 2 business hours to manually review a company registration application.
Can I reserve a company name and register it at a later stage?
Yes. You can reserve a company name by lodging a Form 410A – Application for Reservation of a Name – directly with ASIC. There is a fee payable for this service.
Once ASIC has approved your application, they will send out written confirmation. Name reservations are valid for 2 months from the date of approval.
It is possible to extend the reservation by lodging a new request and fee. Generally, ASIC will only allow two extensions unless there are proven extenuating circumstances.
Does registering a business/company name also trademark the name?
No. Registering a business/company name entitles you to trade under that name but does not give you a legally enforceable right to exclusive use and control, such that a trademark would confer. It is important to check that your proposed business name is not subject to a trademark or patent prior to registration. You can do this by visiting IP Australia.
Should you choose to trademark your name, your intellectual property right to it will be protected from unauthorised use within Australia.
How do I register a trademark?
You can register your trademark by visiting the IP Australia website and completing an online application. You must meet eligibility requirements for your trademark to be considered
It can take 3-4 months for your application to be reviewed and there are costs involved.
What happens once my business is registered?
You are ready for lift off and it’s time to make your dreams a reality. Depending on what you are doing and who you have working for you, you’ll need to submit returns and other information throughout the financial year to the ATO. This can be time consuming so we recommend the use of a qualified accountant who will help you with all your obligations.
Looking for more information to start your business?
While the cost of setting up a company in Australia is relatively low there are a range of considerations that should be looked at during this process, as well as the ongoing obligations once your company is registered. The team at POP Business can provide advice on company formation and registration and provide accountancy services that will help fuel your growth. Get in touch today
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