Start up businesses are getting more and more popular these days, having grown significantly in the last few years. As of November 2018, start up businesses and start up companies are currently valued at more than one billion U.S. dollars. The term start up company or start up business has been thrown around quite a lot in the past few years, gaining a vast amount of popularity. In the modern era, a start up business or start up company can be commonly described as new venture or newly emerged business which offers new product or service that may or may not currently exist. While start up businesses and start up companies can be self-funded, a lot can now also be crowd-funded which has now made it even easier to set up your own start up. As exciting as this can be however, like all businesses, start up businesses and start up companies have tax obligations just like any other business or company.
As per the Australia tax law regarding businesses, the company tax rate in Australia is currently 30% or 27.5% for certain eligible small companies. Goods and Services Tax Registration is voluntary if your turnover from sales is under $75,000 Australian Dollars annually, but it is compulsory to register for the Goods and Services Tax if your Australian Startup is earning from sales $75,000 Australian Dollars or more annually. An Australian Business Number and Tax File Number will also be required if you register for the Goods and Services Tax.
Tax incentives can also apply for early stage investors where you have purchased new shares that will meet the requirements of an Early Stage Innovation Company. The pitfall in this tax innovation incentive however, is that it does not apply to investors who invest in a start up business or start up company where that start up and its subsidaires are earning more than $200,000 Australian dollars during the financial year before the year in which this concession is claimed. What this would mean for investors is that they could possibly gain the capability to make shares in the start up Capital Gains Tax-free in their hands on the circumstance of the relevant Capital Gains Tax event in a period of 10 years from the date of acquisition, so long as the Capital Gains Tax event does not happen within the first 12 months of acquiring said shares. Generating an event like the Capital Gains Tax event can make shares more enticing, thus making obtaining an equity funding simpler for a start up business. Furthermore, a secondary benefit to this is a possible immediate 20% tax offset for the investors which can be used in other tax payable situations provided that certain conditions have been met.
Start up companies can also restructure their start up business and turn it into a brand new company under a provision called the small business restructure roll-over provision. One of the conditions to be able to utilise this provision is if your start up business or start up company has under $10 million Australian dollars in aggregated turnover.