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Business startups on the rise: Accountant warns on importance of setting things up properly

by wrich
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According to Coco Hou tens of thousands of Australians are turning to side gig and contracting work to generate income but are at risk of falling foul of the ATO because they are not operating their activities as a proper business. 

Coco Hou CPA, is the managing director of Platinum Accounting Australia and Platinum Professional Training, a national provider of accounting and bookkeeping services and practical training courses for people seeking to enter and excel in the bookkeeping and accounting sectors.    

“We have seen a monumental shift in employment over the last two years due to the pandemic.  A lot of people have lost their jobs or have been forced to cut back on the number of hours they work due to COVID.  In addition, a lot of people have loved working from home so much they have decided not to go back to the office,” Ms Hou said. 

“As a result, we are seeing a significant surge in the number of people taking up side gig, contracting work and pursuing their own ventures. Effectively, these people are starting up their own businesses and therefore should be managing their activities as legitimate businesses.” 

“The Australian Bureau of Statistics reported last year that the number of small businesses jumped by 15.2 percent over the last financial year. This means there are a lot of people at risk of falling foul of the ATO.” 

Apply for an ABN

“For many people who have been employed and are used to having their pay drop into their account every week or month, this is a completely new way of earning money and they have little to no understanding of their accounting and taxation obligations and the associated requirements around setting up and running a business,” Hou explained. 

“Like any other business, they need to apply for an ABN.  

“In addition, they also need to register for GST when their business reaches turnover of $75,000 or more. If you start a new business and expect your turnover to reach $75,000 or more in the first year of operation then you need to register for GST straight away.” 

Source a good accounts system

Hou believes many people are at risk of failing to set themselves up properly from the outset. 

“Sourcing a good accounts system is critical when you start up a new business. Thankfully, many systems such as Xero, QuickBooks or FreshBooks are cloud-based and are really easy to use,” Hou added.  

“They enable you to easily manage your financials and also upload your receipts as you go via plug and play apps like Hubdoc. They also integrate with your bank account and can be easily accessed by your  accountant which makes tax time a much simpler and more streamlined process.” 

Find a good bookkeeper

“Bookkeeping is one of the most important aspects of starting up a business and bookkeepers are in high demand at the moment,” Hou added. 

“While people are busily trying to build up their client base and deliver services as a side gigger or contractor, they don’t have time to be focusing on the bookkeeping and accounting side of things.  They are going to get themselves into trouble with the ATO.  

“This is why it is important for anyone who is now working in a side gig or contractor capacity to find themselves a good bookkeeper to ensure they are meeting their obligations and importantly capturing and recording all of their expenses so they can claim them come tax time.” 

According to Hou, bookkeeping is an incredibly vital and important profession at any time, but at the moment with so many people in need of bookkeepers, it is also time when work demand is at an all time high. 

“I strongly encourage anyone seeking to engage a bookkeeper to reach out to a reputable business with an established history in the industry,” Hou added. 

“As a national firm of accountants and bookkeepers, we help many startups and businesses but we also have to assist quite a few that have experienced significant issues with bookkeepers who have not fully understood the complexities of bookkeeping work.  It is important to surround yourself with good people when starting a business as it will make the journey so much easier.” 

Coco Hou, is the Managing Director of Platinum Professional Training. Platinum is one of Australia’s largest accounting training and internship providers with offices across all major Australian cities.  Coco Hou is also a CPA-qualified accountant and Managing Director of Platinum Accounting Australia – a national network of bookkeeping and accounting services.