The basics of growing your business
Whether you’re developing new products or services, hiring more staff, ramping up your marketing or expanding your premises, growing your business takes resources. Here are some questions to consider when you’re getting ready to grow your business:
- Is growth the best idea for your business right now?—Before deciding what areas to invest in for growth, you should realistically evaluate what sort of return that investment is likely to deliver. Your business and its resources need to be able to handle the extra work that comes with growth.
- How would you fund growth?—Can you fund growth initiatives out of your existing cash flow or do you need to look for other funds? Weigh up the pros and cons of different funding sources, such as drawing on equity you may have in other assets.
- Is it time to review your business loans?—Put together a strategy for how to structure and pay off your loans. You can potentially save thousands of dollars and years off the loan periods. Prioritising repayment of debts that carry the highest interest rates or have less favourable tax implications can put you in a better position.
- Do you have a plan in case of the worst?—A good contingency plan addresses control and signatory issues if you or your business partner/s are temporarily or permanently unable to make business decisions. Get the right level of insurance to match your changing business needs.
You may want to consider getting financial advice when you’re planning to make changes to your business. Learn more about what to expect when you visit a financial adviser.
Get the right level of cover
As your business grows, your insurance needs will change. Other than the obvious business insurance like general liability insurance and property insurance, you may need to start considering some of the following insurance options, if you haven’t already.
Key person insurance—If an important person in your business can’t work anymore, you can get insurance cover, so your business can keep operating while you figure out a solution.
Buy/sell arrangement—This helps with a speedy handover and clear acknowledgement of what happens in case the business changes hands.
Business overheads insurance—Your business expenses will continue to be paid in case you’re too ill or injured to work.
Know your superannuation responsibilities
Superannuation is important to help your employees prepare for the future. As an employer, you may face penalties for not complying with government rules on super, so it’s a good idea to understand your role in making super payments. Here’s what you need to know.
- Know who is eligible for super payments—Generally you need to make payments into super for employees, if they are 18 years or older and earn more than $450 each month before tax.
- How much super you need to pay—You’ll pay a percentage of the employee’s earnings, currently 9.25%.
- Find out where to pay this amount—You’ll pay into the employee’s super fund. If they don’t specify their super fund, you’ll need to pay this into a default fund.
- Make the payment by the due date—You’ll usually pay contributions quarterly. Below are the cut off dates, which the Australian Taxation Office (ATO) specifies.
|Payments made to employees in this quarter||Cut-off date for payment(s) to superannuation fund(s)|
|Quarter 1 (1 July – 30 September)||28 October|
|Quarter 2 (1 October – 31 December)||28 January|
|Quarter 3 (1 January – 31 March)||28 April|
|Quarter 4 (1 April – 30 June)||28 July|
Setting up a default fund
As an employer, an important part of your role is to make compulsory superannuation payments to a complying superannuation fund for employees. Usually your employee can choose their super fund, but if they can’t or don’t make a choice, you’ll need to make these payments into what’s known as a ‘default fund’ or ‘employer-nominated fund’.
Depending on your industry, the default fund might be called out in an award or registered industrial agreement. If not, you’ll need to choose the default fund, and the fund will need to be a MySuper fund. A MySuper fund is one that can accept default superannuation contributions and meets specific legal requirements.
When you hire a new employee, generally you’ll need to offer them a ‘standard choice form’ and also tell them what the default fund will be if they don’t make a choice. If they don’t make an active choice, you’ll be able to meet your super obligations by making their payments into the default fund.
How payments for new employees work
Julie owns a dry cleaning business with 12 employees. Business is going well and she has hired Rebecca part time to help operate the business on weekends.
Rebecca is over 18 and is expected to make more than $450 a month. So, Julie is certain that she’ll need to know from the outset where to pay Rebecca’s super payments. She has agreed with Rebecca that she will pay her any super in addition to her wages.
Julie gave Rebecca a ‘standard choice form’ and asked her if she’d like to nominate a super account if she already has one. Rebecca said yes—she’d like Julie to pay her super payments into her existing super fund, WXYZ Super so she filled out the standard choice form with her account details.
At the end of the quarter, Julie calculated how much she would need to pay into Rebecca’s super fund. Rebecca earned $650 per month before tax, or $1950 in the quarter. Julie checked the minimum current superannuation rates on the Australian Taxation Office (ATO) website, which is 9.5%, and 9.5% of $1950 is $185.25. So for the quarter, Julie needs to pay $185.25 to WXYZ Super in Rebecca’s name.
Julie checked the cut-off dates for super payments. For work done in the particular quarter, the cut-off date is the 28th of the following month. Julie promptly made the payment before that date to avoid any interest charges or fees.
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