It’s an exciting moment when you see your tax rebate pop into your bank account. There are so many ways to spend it.
Why not use your tax rebate to start a business or even a side hustle? You know, the dream you’ve been secretly harbouring about being your own boss and doing a job you love? With the extra cash from your cash rebate sitting around, now’s the time to launch it.
Here are a few question that should help you decide what to do.
First, what sort of business do you want to run?
Many people decide to launch a business because they can’t do their dream job as an employee. For others, it’s about having flexible work that fits around looking after their family, for example.
A service-based business is easy to launch with few overhead costs. For example, these jobs are easily done from a home office:
- Graphic designing
- Web development
Your tax refund could be used to set up a website, sort out your business registrations and create your branding.
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Do you want to turn a hobby into a career?
Maybe you’re skilled at making pottery … or friends, family and colleagues rave about your homemade cakes. When you discover a natural talent (or work super hard to master a skill), it’s natural to want to share it with the world. You’ll need to purchase extra materials to start making larger quantities.
In this case, you could use your tax rebate for loading up on supplies, registering your business and getting started with social media marketing. Selling your creations could be a rewarding way to earn money.
Once you’ve got an idea of the type of business you want to start, there are a few more things to think about.
Is there enough demand to make your business viable?
Before you press launch, do some research. Maybe you love the idea of painting puppies’ toenails, but if no dog owners are looking for that service, the business will be a flop.
You must identify a need that people want to fill and then make your business the perfect option for them.
Next, find out how much the current price is for what you want to offer and then crunch the numbers to see if you will be able to make a profit.
Let’s say it takes you an hour to make a widget. Let’s also say that materials cost $10, and the market won’t pay more than $15. So you’re only going to be making $5 an hour before expenses.
Will turning your hobby into a business take all the fun out of it?
While the idea of turning a hobby into a business is enticing, remember you won’t get to spend all day baking cakes or designing websites.
There’s a lot of admin and paperwork that goes into making a business a success and it’ll all be on your shoulders until you can outsource it (which might be awhile).
But if you’re happy dedicating time and energy to making your business work, not just being creative, then you’re ready to get started.
Key steps to starting a business with your tax rebate
You’ve got an idea and the will to carry it out. Here are the nuts and bolts of starting a business in Australia:
1. Getting it registered
To start a business, you need a Tax File Number (TFN). If you’ll be operating as a sole trader, you’ll be able to use your individual TFN. If you’ll be operating as a company, partnership or trust, you need a separate TFN.
Every business must have an Australian Business Number. You’ll also need to register for GST if you’re earning over the GST threshold.
If you’re using a business name other than your own, you’ll need to register it with ASIC, and look into other registrations you might need with your local council. If you’re working from home, you may need to let your landlord and home and contents insurance provider know as well.
To learn about the different registrations and how they apply to you, visit the ATO site.
2. Record keeping
It’s vital to begin keeping records of your income and expenses as soon as you launch your business.
It’s also a good idea to have a chat with an accountant before starting your business so you’re aware of your obligations and responsibilities to the Australian Taxation Office. The ATO requires a certain amount of information for each record including the:
- Purpose of the transaction
- Nature of the expense or income (sale, wages, rental payment, etc.)
All records relating to starting, running, changing or selling your business must be kept and easily accessible (most records need to be kept for five years). Records must also be in English (or easily converted to it) and you need to be ready to show them to the ATO should they ask for them.
3. Setting up your banking
You need to set up a separate bank account if your business will be operating as a company, trust or partnership.
Having your business expenses mixed with your personal purchases makes it messy and time-consuming when you have to lodge your tax return. So it’s best to keep your personal and business expenses separate.
4. Hiring employees
If your business idea needs more than just you to make it happen, you’ll need to understand your responsibilities as a boss.
Employers have to do tasks like deducting tax from their employees’ pay and sending it to the ATO. You’ll also need to pay superannuation contributions into workers’ chosen fund.
Along with making sure they’re trustworthy and reliable, you need to consider how well you’ll work together before hiring someone. If you’re a perfectionist, hiring a qualified yet laid-back employee might lead to you both feeling frustrated about the way work gets done.
It’s also worth thinking about the kind of culture you want to create. Is your brand going to be known for its quirky style? Then hiring a straight-laced team member means they might find it difficult to embrace and promote the brand culture.
It’s always a good idea to have a probationary period after hiring staff. This allows both of you to see if they’re the right person for the job.
5. Making friends in the business community
On top of all the other to-dos, you’ll also want to make an effort to join local business networking groups to start meeting other business owners. It’s the best way to learn from others’ mistakes without making them yourself.
Plus, the more people you tell about your business, the more brand awareness you build — they could even turn into customers.
Planning for success
There are two plans you need to create: a business plan and a marketing plan. Taking the time to research and map out both of these gives you a much greater chance of succeeding in running a profitable business.
A business plan helps to see if what you’re aiming for is viable. It also:
- Helps you prioritise
- Gives you greater control over the different factors that impact how a business runs
- Makes it much easier to reach your goals
A business plan is also critical if you should need further financing beyond your tax rebate to sustain your business. Investors and banks will want to see that you’re serious about being a business owner; you’ll need to convince them that investing in it is a good idea.
A marketing plan is about:
- Identifying your target market. By choosing your ideal customer, it makes your promotional efforts more likely to succeed.
- Researching your competitors. This tells you what’s working well in your industry and helps you find your point of difference.
- Deciding which channels, media and tools to use, along with the message you want your audience to hear.
Do something amazing with your tax rebate
With the extra cash in your back pocket, now’s the time to make your bright idea a reality. Set yourself up for success and choose a business name that’s easy to remember. Then check if it’s available as a domain. Get your banking and registrations sorted and hire employees if you need them.
Once you’ve got your business all planned out, it’s time to think about your new job title. Chief Everything Officer? Entrepreneur? Head of Wizardry?
Now go show the world what you can do.