New Business Tax Setup: ABN, GST and PAYG in Your First 90 Days

Most new business owners think about tax once, at the end of the financial year. The registrations that actually matter happen in the first few weeks: getting an ABN, working out if and when you need to register for GST, setting up PAYG withholding once you start paying wages, and knowing what to do with expenses you paid before you opened your doors. Get these wrong and you either miss an obligation or lodge for things you didn't need to. Here's the order to work through them.

Step 1: Register for an ABN first

An Australian Business Number is the foundation everything else sits on. You're only entitled to one if you're genuinely running a business or enterprise, not just planning to one day, and registration through the Australian Business Register is free. Apply before you issue your first invoice. Without an ABN, any business paying you must withhold tax at 47% from payments over $75 (excluding GST) under the no-ABN withholding rules, which can badly disrupt cash flow in your first months.

Step 2: Work out when GST registration applies

GST registration is compulsory once your GST turnover reaches, or you reasonably expect it to reach, $75,000 in a 12-month period. The ATO checks this two ways: your actual turnover for the current month plus the previous 11, and your projected turnover looking forward. If either test tips over the threshold, you have 21 days to register. Below that threshold, registration is optional. Registering voluntarily lets you claim GST credits on setup purchases like equipment and software, but it also means charging GST on every sale and lodging regular activity statements, so it's worth costing out before you opt in early.

Step 3: Set up PAYG withholding once you're paying wages

Pay as you go (PAYG) withholding is the system for deducting tax from payments to others. It applies once you pay employees, pay yourself a director's salary through a company, make payments to contractors under a voluntary agreement, or pay a supplier who hasn't quoted their ABN. The rule is strict on timing: you must register for PAYG withholding before you make the first payment you need to withhold tax from, not afterwards. If you already know you'll be hiring or paying yourself a wage, register at the same time as your ABN rather than waiting until payday.

Step 4: Know when PAYG instalments start

Don't confuse PAYG withholding with PAYG instalments. Instalments are prepayments towards your own income tax bill, not tax withheld from someone else. In most cases the ATO won't put a brand-new business into the instalments system in its first year. Entry generally happens automatically once you've lodged a tax return showing instalment income of $4,000 or more and tax payable of $1,000 or more. The catch is that this means your entire first year's tax liability can land as one lump sum. You can ask the ATO to start PAYG instalments voluntarily from earlier, which spreads that liability into quarterly payments instead of one large bill. Once you're in the system, the ATO sends an activity statement or instalment notice telling you the amount or rate to pay, generally due 28 days after the end of each quarter, and this is reconciled against your actual tax bill at year end.

What about costs from before you started trading?

Expenses incurred before your business began operating aren't automatically lost. Under section 40-880 of the ITAA 1997, small and medium business entities can generally get an immediate deduction for certain start-up expenses, including professional, legal and accounting advice on how the business should be structured or operated, and fees paid to an Australian government agency to establish the business, such as an ASIC registration fee. Other pre-trading capital costs that don't fit this category may need to be deferred until the business actually commences, so it pays to get these classified correctly in your first set of records rather than sorting it out at tax time.

Getting the order right

ABN first, then GST if your turnover requires or justifies it, then PAYG withholding the moment you're paying anyone (including yourself through a company), with PAYG instalments generally following in year two unless you choose to start earlier. Layered on top of that is making sure pre-trading costs are captured and classified correctly from day one. None of this needs to be difficult, but getting the sequence and the deadlines wrong in the first 90 days is one of the most common ways new business owners create avoidable admin and cash flow pressure. If you'd like this set up properly from the outset, FTC's business services team can walk through each registration against your specific structure and timeline.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.