where to start - start of my questions

[needinghelp09]

Hi, loving this website there are some great people giving advice and while l've been looking l can't find my exact questions so l'll post them myself and await your advice.

A quick about me, l'm a stay home mum of two boys (6months and 2 years old) and while l love staying home l'm thinking it would be nice to have a small sideline that gave me another purpose in life as well as brought in a bit of extra cash. Without going into details of the item l make a gift for friends when they have a baby, the gift always receives rave reviews and l'm always told l should be selling them. They are not available here is warrnambool were l live and after a bit of time l'm thinking perhaps l should be selling them but how/where??

Now my actual questions are do l need an abn? Our accountant told my husband when he was in getting our taxes done that because l was going to be doing it as a hobby on a small scale l wouldn't need one, but l'm reading on hear that if l sell it to a store they can withhold almost 50% of sale price if l don't have a abn? So l'm thinking l would probably be better off getting an abn?

Does this mean l need to submit quaterly tax things?

Do l need to add GST (and register for GST) to the price of the items?

If l sell to a store l would write an 'invoice' not a 'tax invoice' unless l registered with an abn?

What mark up would a store expect to add to an item they buy? I read one thread you talked about 100% and this would make the item way overpriced?

OK l'll leave the questions there, sorry if l'm all over the place, probably reflects my comfused mind at the moment.

Cheers
Corie

[SOUTH EAST ACCESS]

Hi Corie

Taking your questions one by one:

"Now my actual questions are do l need an abn?"

Any person carrying on a "business" must have an ABN. Now it gets sticky - what is carrying on a business mean. Basically the ATO has 4 tests
- profitability
- size
- Effort (substabtial and regular)
- business records

Your accountant probably is refering to size.

Our accountant told my husband when he was in getting our taxes done that because l was going to be doing it as a hobby on a small scale l wouldn't need one, but l'm reading on hear that if l sell it to a store they can withhold almost 50% of sale price if l don't have a abn?

Not quite right. There is a form which you can provide with your invoice that says it is a hobby and that they do not need to withhold the amount. The ATO website has the form - search on hobby.

Does this mean l need to submit quaterly tax things?

No. You are getting your ABN and GST registrations mixed up. As long as your trading is below the threshold, you don't need to be registered for GST and therefore don't need to lodge a BAS.

Do l need to add GST (and register for GST) to the price of the items?

No. Only if you are registered for GST.

If l sell to a store l would write an 'invoice' not a 'tax invoice' unless l registered with an abn?

Correct but you must also provide the hobby form.

What mark up would a store expect to add to an item they buy? I read one thread you talked about 100% and this would make the item way overpriced?

Depending on the product, 100% would be reasonable.

I hope this helps

David Stephens

[exstatic]

Hi Corie,

Great to hear you are looking to take that next step and you are certainly asking the right questions, so thats a great start.

In regards to the accountant questions, I suggest you go meet with an accountant they will answer everything you need. It is true that if it's a hobby business then there are some differences in the way you charge, but once it goes past a hobby then you need to be ready to change your structure to a proper business.. so I think its best to chat to an accountant who can hopefully help you put a plan together.

In regards to margins on your product, this is where you will need to do a budget, first you need to work out how much your product costs to make, and I dont just mean the materials.. I mean think about if you had to pay someone else to make it for you, so that would be the materials + labour as a basic start.

So just say the materials cost you $2.50, and it takes you two hours to make something.. how much is that two hours worth to you? Or to someone else if they were to make it for you.. remember a good business is one that can run without your being there!

You will also want to include a small % of your overheads into the cost of your product as well, this would be including things like admin stuff, stationary, advertising, phone calls all those indirect type costs.. they have to paid for as well!

So once you can come up with a total cost to make your product then you can put a profit margin you feel comfortable with, and obviously one that prices your product in the right range for its buyers.. you may want to add the 10% for GST in now so if in the future you are required to charge it, it doesn't change the price of your item.

Anyway I hope that helps.. the next step is finding buyers.. selling online and on ebay is always good, craft markets and signs in your local area.. or even maternity ward could be a good way to start!

Best of luck.

[Tracey Anne]

Hi Corie,

You will find some great advice on here to help you.

I would suggest you register a business name (as a Sole Trader) and apply for an ABN before you get started. It doesn't cost much (I think the fee for registering a business varies from state to state). As a sole trader, any tax return will just be an add-on to your individual return. You might be asked to make quarterly PAYG payments for future years if you return an income. Keep in mind that apart from the issue of having tax withheld from any payments, many people don't like to buy goods or services from people without an ABN as it can appear unprofessional to not have one.

You don't need to charge GST until your business is earning $75000 p/a.
The advice I received was to stay out of the GST net until it becomes necessary as otherwise you will have to lodge a quarterly BAS statement.

I would also grab a domain name (even if you don't intend to set up a website at this stage). You can do this for not much more than $20 for a year).

These few steps will make everything easier for you later if your product (which sounds very intriguing) takes off and you end up with a booming little business.

[Karen Wardle]

Hi Corrie

Starting a business is exciting! But when you aren't sure where to go to find the answers it can be a bit confusing. If can feel like you are going around in circles. One link leads to another then another, anyway I am sure you know what I mean.

But you have stumbled upon the flying solo forum and regardless of how you got here you will find answers to every conceivable business question that you can imagine.

The previous posts here have provided some great information about GST and ABN issues so I won't go into that further.

I do offer a free start up guide from my website if you are interested.

Good luck with your business and please let us know how it goes and what the business is. And don't just think that we are being polite. Most of us here really do want to know.

All the best

Karen
http://www.you-can-start-business.com

[KarenC]

Regarding GST - it's when TURNOVER exceeds $75000, not profit or income after expenses deducted. So if your turnover will exceed that (or you are hoping it will) you have to register and charge GST.

It’s a lot harder to add GST once you get to the turnover mark and it’s normally expected by other businesses. The ATO is allowed to backdate fines if people don’t register for GST and their turnover is more than the limit once their tax return is submitted.

It’s when TURNOVER exceeds $75,000, not profit or actual income. So if your turnover will exceed that (or you are hoping it will) you have to register and charge GST. This applies even if you end up not having to pay income tax for the year.
(The turnover used to be a lot less at $50K to begin with, hence so many of us had to register years ago even if after expenses our income was only $10 or 30K.) Educational services also have to charge GST if turnover exceeds $75K.

See this page at ATO

http://www.ato.gov.au/businesses/con...tent/34012.htm

[needinghelp09]

thanks for all the great advice, you have helped me decide which direction l am goding to take. together with some "market research' l've been doing with friends and family l'm going to look into doing the selling myself rather than stocking the items in a store, so l now am off to look into web information and my next list of questions.

thanks
corie

[George Trevino]

Hi Needinghelp09:

Congratulations for start thinking beyond your 4 walls!!! It's hard to start something, isn't it?

Just 4 issues about your questions:

1) If you're trying to do this as a hobby then your fist step should be in looking for a small distribution channel that doesn't mark up 100% but something reasonable for both parts.

2) Check with a lawyer how you can protect your product from the sharks out there. It's not rare someone's great idea be stolen by a more experienced businessman with stronger distribution capabilities.

3) Point out to this lawyer that this is only something small and that the idea is to do business for yourself and not making him rich with your money and work.

4) For sure, you should invoice the stores you're selling them and charging them the GST. Now your a businesswoman and not a consumer. Let your clients pay your GST for you.

Congratulations and keep your efforts in the right direction.

George

Originally Posted by needinghelp09

Hi, loving this website there are some great people giving advice and while l've been looking l can't find my exact questions so l'll post them myself and await your advice.

A quick about me, l'm a stay home mum of two boys (6months and 2 years old) and while l love staying home l'm thinking it would be nice to have a small sideline that gave me another purpose in life as well as brought in a bit of extra cash. Without going into details of the item l make a gift for friends when they have a baby, the gift always receives rave reviews and l'm always told l should be selling them. They are not available here is warrnambool were l live and after a bit of time l'm thinking perhaps l should be selling them but how/where??

Now my actual questions are do l need an abn? Our accountant told my husband when he was in getting our taxes done that because l was going to be doing it as a hobby on a small scale l wouldn't need one, but l'm reading on hear that if l sell it to a store they can withhold almost 50% of sale price if l don't have a abn? So l'm thinking l would probably be better off getting an abn?

Does this mean l need to submit quaterly tax things?

Do l need to add GST (and register for GST) to the price of the items?

If l sell to a store l would write an 'invoice' not a 'tax invoice' unless l registered with an abn?

What mark up would a store expect to add to an item they buy? I read one thread you talked about 100% and this would make the item way overpriced?

OK l'll leave the questions there, sorry if l'm all over the place, probably reflects my comfused mind at the moment.

Cheers
Corie