Small Business / Contracting getting started


So you are about to start your business or your contracting business, congratulations you will find the independence and control over your destiny rewarding and challenging……. as business owners ourselves we understand.

There are many things you need to know, however we have focused on the very basics of what you need to do to get started. Whilst there are many other matters we can advise on, without specifically looking at your situation its not appropriate to advise that here, but the below provides 6 simple general advice steps to get you started.

This page provides  a simple answer to what may seem mind boggling…….

The 6 Tax Steps to starting your business

Follow our 6 Steps and follow the links…..good luck!

STEP 1 – Will you be operating through a company “Pty Ltd” or not. To understand more about what is a company <click here>, contact us for a simpler explanation or try <our explanation>.

STEP 2 –You need to apply for an ABN. To apply for an ABN <click here> and then click on ABN the government website  for registering for an ABN for contractors/businesses), or contact us to do it for you.

Remember, If you are a contractor, you need to know whether you as a contractor are an Individual or a Company for example, and then apply for the ABN. Provide this ABN to your employer and put this ABN on the invoices you submit to your Employer/Contractor.

When completing  this ABN application form you will be asked a series of questions, ie (1) whether you need or want to register for GST-goods and services tax, (2) whether you will pay PAYG withholding – tax deducted from wages (3) whether you will pay FBT-fringe benefits tax….and so on.

Let’s assume that it’s just you working for your employer/contractor and you are not driving your own truck that could be entitled to the fuel tax credits system (refund of tax). AND you expect to earn less than $75,000 per annum, in this case its simple…….. you do not need to register for GST, FBT etc; you only need to register for the ABN.

STEP3. – Appointing an Accountant – Complete our New Client Form so we can register you with the Tax Office as being our client. This has a number of advantages such as (1) alerting the ATO that you are having your return prepared by a tax Agent and therefore the risk of your tax return being prepared incorrectly is less and therefore likely Tax Office Audit of your tax return is less (2) the lodgement date of your tax return is extended later than 31 October the due date it would be due if you were not registered with a tax agent; (3) means delaying the tax bill to a later time (4) take’s the headache away from trying to do it yourself.

STEP 4 – Record Keeping so you can lodge your tax return. There are a few ways to prepare your records and different clients prefer different methods. Accordingly we will provide two ways you can do this, but before we explain these TWO (2) METHODS you need to make sure you use your bank account correctly when paying for business expenses and receiving your contracting income.


Open a bank account that you will only use for your business. DO NOT PAY PERSONAL EXPENSES FROM THIS ACOUNT. If you need to pay for fuel etc do not pay using cash, use a debit card attached to this account. If you use a credit card for business expenses, then apply for a new credit card that you only use for business expenses.

If your unsure whether it is a business expense then use the business card but identify that your unsure on the statement….more on the below.


STEP 6(1) – METHOD 1 – remember that the cost is cheaper for you if we do the Business Activity Statement , the reason is that if we setup your accounting software and the sales, cost codes and gst codes properly from the begining and link this to your bank accounts as bank feeds then the process is error free and makes the BAS and end of year tax returns easier to do, less pain for you and us, and more importantly lets you focus on your business not record keeping.

FEES – The cost for a small business is from $49 per week, call us to find out the fees for you. We prefer to bill monthly which is better for cash flow for you, no different than if you had an employee in your business. There is a one off setup fee of the accounting software from $600, this is where we setup your income and expenses and GST codes and setup bank feeds etc.

STEP 6(2) – METHOD 2 – Download from your bank in a QIF format the bank statement. Then allocate the deposits and payments into descriptions that can be found from our list of standard descriptions that we call Chart of Accounts.  <Click here> for the chart of accounts/standard descriptions.  We can also send you a spreadsheet that you can use to categorise the deposits and payments <Click here> > then email this to one of the team at Mercia to prepare BAS’s Financial Reports and your Tax Returns. However to ensure that we spend less time you must make sure that the spreadsheet reconciles (equals) to the bank statement. If it doesn’t then your effort to reduce our time may be in vein. You must spreadsheet reconciles to the bank statement so that we know all income and expenses are in the spreadsheet.

To make sure the spreadsheet reconciles to the bank statement use the Spreadsheet example that shows how this is done. <Click here> for the free ” Cash book Spreadsheet and then study it and then call you accountant to confirm your understanding.

TIP – The days of using spreadsheets for preparing your accounts are over. Using MYOB, XERO QUICKBOOKS is the only way to proceed, we strongly recommend this. Each software has its advantages  and disadvantages depending on the type of business you have, including industry specific software packages such as mechanical repair shops. Call us for a recommendation.

Great! Now you understand you have a snapshot of what to do to get your business started so you can lodge the BAS and tax return’s you can now get on with the more exciting aspects of growing your business.

Other Useful Tips –  if you’re new to contracting or Small Business:

  1. Are you earning more than $75,000 – then <click here> and click the “BAS, Business Activity Statements” link to learn more about paying GST have to pay, and how to calculate it. Be careful registering for GST, you could be paying more tax than you need to!
  2. Super and if you are an Individual – then even though you are paying your own tax, your Employer/Contractor should pay your super.  To understand more <click here> and click the Superannuation link. Remember the Software we set you up with does this for you.
  3. Super and if you are a Company – then your Employer/Contractor does not need to pay superannuation for you. However you may need to pay your Company may need to pay superannuation on your behalf. To understand more <click here> and click the Superannuation link.
  4. Tax Basics <click here> and click on Basics for Business
  5. Starting a Business – For more useful tips  for persons new to contracting and small business such as public liability insurance etc… see <Starting a Small Business>, <Business in Australia> links to find out more.

There are many links on this website that alert you to other issues to consider when starting a business, risk minimisation is one important factor, if you are about to enter into a commercial arrangement, for example you are setting up a new company with new business partners, then a legal document such as heads of agreement, followed by directors/shareholders agreement can mitigate  risk from the multitude of events that can occur whilst operating a business.  There are many legal agreements and contracts that can assist in commercial arrangements and your legal advisers can assist in this regard, as Accountants we cannot prepare legal agreements.

We strive to make your Mercia experience as efficient,  productive and as value for money as possible…. this is why we invest in this free general advice website which may include other rules that apply to you such as <personal services income rules>. ….for more info don’t hesitate to contact us directly.