4.2 Key legal requirements — registration, taxation and government regulations

Question 1

What are the key legal requirements for establishing a business?

Answer 1

1. Legal and government regulations
2. Business name registration
3. Registering a domain name
4. Taxation compliance
5. Local government legal requirements

Question 2

What are the two important local laws?

Answer 2

1. Zoning
2. Health Services

Question 3

What needs to be taken into account for business owners?
(hint: regarding Legal and government regulations)

Answer 3

There are many licences, permits, approvals and authorities which must be taken into account by business owners for the business to run smoothly.

Question 4

What should all business owners have when commencing to establish a business?
(hint: regarding Legal and government regulations)

Answer 4

All business owners have a legal obligation to observe the statutory regulations when commencing and operating a business.

Question 5

What would happen if business don’t comply with the legal requirements provided?
(hint: regarding Legal and government regulations)

Answer 5

businesses that do not obey the law risk losing customers and their reputation, being fined, or losing the right to continue trading.

Question 6

How can business owners evaluate the performance of their business? And how does this help the business in the future/long-term?
(hint: regarding Legal and government regulations)

Answer 6

Businesses can evaluate their performance according to the extent to which they have observed laws and regulations. Observing the law, and indeed, exceeding legal expectations, can lead to a business outperforming competitors.

Question 7

What is the Australian Securities and Investments Commission responsible for?
(hint: regarding Business name registration)

Answer 7

The Australian Securities and Investments Commission (ASIC) is now responsible for a national business name registration service.

Question 8

How must a business register? On what stances does a business need to register in this?
(hint: regarding Business name registration)

Answer 8

Businesses need to register their business name, except when the name is that of the owner, and then it is optional. If something is added to a personal name, such as ‘Pty Ltd’, ‘Motors’, ‘and Associates’ or ‘and Co’, then the business name must be registered. This is to prohibit anyone else from trading under a similar name, and to protect consumers by allowing them to identify the owner of a business name.

Question 9

What must a business owner have before registering in the ASIC and what must they research beforehand? (hint: regarding Business name registration)

Answer 9

The owner must have an Australian Business Number (ABN) or an ABN application reference number to apply for a business name. Before registering a business name, the owner should conduct a search on the ASIC website to check whether the name is already taken.

Question 10

Does registering a business protect a business? If not how may business owners protect their business?
(hint: regarding Business name registration)

Answer 10

Registration of a business name does not protect or establish any specific rights to that name. If the business name is a crucial part of the business’s operation, then it should also be registered as a trademark with the federal agency responsible for intellectual property (IP Australia), which administers the Trade Marks Act 1995 (Cwlth).

Question 11

What are the requirements and processes for registering a company name in Australia?
(hint: regarding Business name registration)

Answer 11

The owner of a company can register the business’s name, although a company name is not compulsory. A company can be known by its Australian Company Number (ACN), a unique number ASIC issues to every registered company. The public must be able to tell if the registered company is a public or private company. For example, a private limited company must include the words ‘proprietary’ and ‘limited’ or abbreviations of these words at the end of its name. The name of a company can be registered when the owner goes through the process of registering his or her company.

Question 12

What is the term domain name?
(hint: regarding Registering a domain name)

Answer 12

the address of a website on the internet

Having an online presence is a necessity for most businesses. A key element of a business’s online presence will be the domain name, which is the address of its website on the internet.

Question 13

What factors should a business consider when choosing a domain name for its website?
(hint: regarding Registering a domain name)

Answer 13

It is important that the business chooses a unique domain name that represents its activities. It also helps if the domain name is easy to remember and spell, so that customers can find the website without difficulty.

Question 14

Why might a business register multiple domain names, and how can they check the availability of a domain name?
(hint: regarding Registering a domain name)

Answer 14

A business can register multiple domains to help its customers find them more easily and to prevent other businesses from registering a similar domain name that might confuse customers. A business can see whether a domain name has already been registered by checking the registry online.

Question 15

How can a business register a domain name, and what are the typical costs associated with domain name registration compared to building and hosting a website?
(hint: regarding Registering a domain name)

Answer 15

Domain names can be registered through resellers and registrars by visiting the Australian Domain Administration website. Although building and hosting a website can cost thousands of dollars, registering a domain name generally only costs between $10 and $100 per year.

Question 16

What is taxation?
(hint: regarding Taxation compliance)
- examples

Answer 16

Taxation is a means by which the government finances its expenditure by collecting money from individuals and businesses. Tax can be imposed, for example, on income, on capital gains and on the provision of goods and services.

Question 17

What is the Australian Taxation Office (ATO)?
(hint: regarding Taxation compliance)

Answer 17

the government body in charge of administering and collecting tax for the federal government

Question 18

Why is it important for someone starting a business to understand the various taxes that apply, and which levels of government impose these taxes?
(hint: regarding Taxation compliance)
- link this to the ATO

Answer 18

Many different taxes apply to different types of businesses, and it is important that a person starting a business becomes familiar with all relevant tax regulations. Some of the main taxes that affect a business are imposed by the federal and state governments and are shown in the table and figures that follow.

Question 19

What is a Tax File Number (TFN), and why does a business owner need to obtain one when establishing a partnership or company?
(hint: regarding Taxation compliance)

Answer 19

A business owner establishing a partnership or company will need to obtain a tax file number (TFN) for the business. This is a unique number issued by the ATO to individuals and organisations to assist with managing tax and other government services. A TFN can be acquired at the same time as an ABN. A sole trader will need to use their personal TFN when dealing with the ATO.

Question 20

What is a progressive tax rate?
(hint: regarding Taxation compliance)

Answer 20

a tax rate that increases as the individual earns a higher income

Question 21

How is federal income tax applied to individuals and businesses, and what are the differences in tax rates for companies versus individuals?
(hint: regarding Taxation compliance)

Answer 21

Federal income tax is levied on the taxable income of an individual or a business. It is calculated differently for individuals and companies. Companies pay a flat rate tax of 30 per cent for larger businesses or 25 per cent for businesses with a turnover less than $50 million. Individuals, on the other hand, pay a progressive tax rate, whereby the rate of tax increases with the amount they earn.

Question 22

What are some other federal and state taxes that business owners may need to register for, and what do they involve?
(hint: regarding Taxation compliance)

Answer 22

There are many other federal taxes that apply to businesses, depending on their activities. The business owner may need to register their business for pay as you go (PAYG) withholding, goods and services tax (GST) and fringe benefits tax (FBT).

Question 23

Explain PAYG
(hint: regarding Taxation compliance)

Answer 23

Pay as you go (PAYG) withholding. Its a Major federal taxes that apply to business. It withholds:
- Taken from an employee’s salary or wage directly
- Imposed on the employee

Question 24

Explain GST
(hint: regarding Taxation compliance)

Answer 24

Goods and services tax (GST) is a Major federal taxes that apply to business. It has:
-A broad-based tax of 10 per cent on the supply of most goods and services consumed in Australia
-Imposed on all consumers
-Businesses are only required to register for GST if they earn $75 000 or more in a financial year.

Question 25

Explain FBT
(hint: regarding Taxation compliance)

Answer 25

Fringe benefits tax (FBT) is a Major federal taxes that apply to business. It has:
-Tax on the provision of a benefit to an employee — such as a car for private use, or a low-interest loan — in place of a wage or salary
-Imposed on the employer

Question 26

Explain Stamp Duty
(hint: regarding Taxation compliance)

Answer 26

Stamp duty is a Major state taxes that apply to business.
- Placed on documents that give evidence to transactions, such as the purchase of property
-Imposed on the individual or business

Question 27

Explain Land Tax
(hint: regarding Taxation compliance)

Answer 27

Land tax is a major state taxes that apply to business.
-Annually levied on the owner of the land

Question 28

What is a Business Activity Statement (BAS), and what obligations must businesses report when submitting it to the ATO?(hint: regarding Taxation compliance)

Answer 28

Any business registered for GST must complete a business activity statement (BAS). This is a form submitted to the ATO to report a business’s taxation obligations. Businesses can remit tax due on income earned during the period as well as any GST and employee PAYG withholding obligations. The BAS is lodged periodically with the ATO.

Question 29

Why is it crucial for business owners to obtain local government approval before starting operations, and what are the potential consequences of not doing so?
(hint: regarding Local government legal requirements)

Answer 29

Many business owners overlook the importance of local government regulations. Any business using premises or land must first seek local government approval. Commencing trading before approval is obtained could result in the closure of the business and wasted time, money and effort.

Question 30

What business activities are controlled by local governments, and what specific regulations do they enforce?
(hint: regarding Local government legal requirements)

Answer 30

Local governments have control over the following business activities:
-land zoning and the purpose for which a building or land can be used
-new development applications and alterations to existing premises
-fire regulations, especially the provision of adequate fire-prevention facilities
-parking regulations governing the number of parking spaces that need to be provided
-health regulations
-business signs — their size, shape and location.

Question 31

What are zoning regulations, and how do they impact business activities within residential areas?
(hint: regarding zoning regulations)

Answer 31

Local government ensures that business activities do not infringe on residential areas. Each council has a local planning scheme that describes the types of activities or developments that may occur in different areas of a suburb or district. Land is zoned for particular uses, such as residential, industrial, business or other.

Question 32

Why is it important for business owners to consult with the local council about zoning regulations, particularly regarding the location and operational hours of their business?
(hint: regarding zoning regulations)

examples

Answer 32

When commencing a business, the owner must consult with the local council to find out which zoning regulations will affect the business now and in the future. For example, a manufacturing business that uses heavy equipment and wants to operate a 24-hour shift would need to be located where zoning regulations allow it to operate in this way. A location close to a residential area would not be suitable because of the noise pollution and the traffic hazards that the business would create in such an area.

Question 33

What role does local government play in ensuring health compliance for businesses, particularly those in the food industry, under the Food Act 1984 (Vic)?
(hint: regarding health services)

Answer 33

Local government also ensures compliance with health regulations under the Food Act 1984 (Vic). Each local council supplies businesses (primarily those dealing with food, such as cafés, restaurants, butcher shops and bakeries) with the regulations and standards they must meet in order to obtain a licence to operate.

Question 34

What is the role of health officers in maintaining standards for businesses, and what consequences can arise from non-compliance with health regulations?
(hint: regarding health services)

Answer 34

A health officer will inspect premises regularly, often without warning, to ensure the business owner maintains standards. If problems occur, then the business is given a period of time to rectify the situation or it will be closed down. Local councils may also register and inspect other premises such as accommodation and hairdressers to ensure they meet hygiene and safety requirements.

Question 35

Summary (3 points of subunit 4.2)

Answer 35

A business must ensure that it is familiar with all of the various legal requirements that may affect it, as failing to do so can have serious consequences for the business and its owners.

A business must legally register a business name and domain name, and comply with tax regulations.

Businesses must comply with local government regulations.