Book Business Hints for the New Financial Year

The internet has revolutionalised how we do business by providing a new medium to sell products to a worldwide market – especially books! While the lower capital costs of operating through the internet have opened up many business opportunities, there are some fundamentals to be considered when starting to run your book writing and sales as a business. For example, as an agent selling your books, Palmer Higgs requires you to have a registered ABN so that we do not have to withhold tax on your author commission. We asked David Golik of Haines Muir Hill, Chartered Accountants to run through some accounting basics you need to consider

Business or Hobby

The first step, and one of the hardest, is determining whether your activity constitutes a business. Some indicators to consider when making this determination are as follows:

• Does the activity have a significant commercial purpose?
• Do you have a purpose of profit as well as a prospect of profit?
• Is there repetition and regularity to your activity?
• Is your activity planned, organised and carried on in a business-like manner?
• Would it be true to say your activity is really better described as a business, rather than a hobby?

Making this determination is important as it affects whether:

• Your revenue is assessable for taxation
• You can claim a tax deduction for business expenses
• You are entitled to an Australian Business Number
• You need to be registered for GST.

Australian Business Number

If you are selling goods or services you may be required to apply for an Australian Business Number (ABN).

An ABN is important. You must supply your ABN when invoicing for goods or services. If you do not supply an ABN, your purchaser has an obligation to withhold 46.5% from monies owing to you and remit this to the Taxation Office.

If you are not entitled to an ABN you must complete a Statement by Supplier form (http://www.ato.gov.au/content/downloads/nat3346.pdf). A Statement by Supplier form advises the purchaser why you are not entitled to an ABN and as such why the purchaser should not withhold 46.5% from your payment.

Goods and Services Tax

If your business has an ABN, you need to consider registering for the Goods and Services Tax system (GST).

The requirement to register for GST is based on your business turnover. Businesses with an annual turnover of $75,000 or more are required to register for GST.

Where your business chooses not to register for GST, you need to check your business GST turnover on a monthly basis to ensure you do not exceed the registration threshold.

Your business reaches the GST turnover threshold if either:

• Your business turnover for the current month and the previous 11 months is $75,000 or more
• Your business turnover for the current month and the next 11 months is likely to exceed $75,000 or more (projected)

If your business passes either of these two tests, you have 21 days to register for GST with the Taxation Office.

Starting a business carries with it many obligations to ensure compliance with regulatory bodies. There are several taxation, accounting and management matters that need careful consideration. Problems can arise when things are not properly planned. If you are considering going into business or are in business, talk to your tax advisor. Your tax advisor will be able to guide you through the relevant issues facing your business.

Please feel free to contact David Golik of Haines Muir Hill, Chartered Accountants, with any business, taxation or financial planning matters.