Business in NSW

Welcome
Starting a Business Checklist
Buying a Business
Buying a Franchise
Legal and Regulatory Requirements
Commercial Leases
Employing Staff
Taxation
Consumer Legislation
Insurance
Business Law Accredited Professionals
Accountants
Useful Contacts

Welcome

New South Wales offers a wonderful quality of life and many exciting opportunities for business. It is one of the most attractive locations to do business in the Asia Pacific with a strong and sophisticated economy, workforce and infrastructure base.

This booklet will help you understand some of the main requirements and relevant points for doing business in New South Wales. The booklet covers Starting a business (pp 2-3); Buying a business or franchise (pp 3-6); Meeting your legal and regulatory requirements (pp 6-7); Taking out commercial leases (pp 7-8); Employing staff (pp 8-9); Taxation (pp 9-11); Consumer legislation (p 11); Insurance considerations (pp 11-12); and Sourcing an accountant and lawyer (p 12); Useful contacts (pp 13-14).

For a detailed look at the costs of doing business in New South Wales (NSW), please refer to "The NSW Competitiveness Report" at www.business.nsw.gov.au.

This checklist covers the main things you need to consider in the research and establishment stages of starting a business.

The research phase of starting a business in New South Wales involves checking out some of the business and industry requirements as well as assessing whether you are ready and have chosen the right sort of business to undertake.  Here are some important tips:

• Check what licences/registrations may be required through the Business Licence Information Service (www.fairtrading.nsw.gov.au).
• Check local council requirements regarding zoning, health regulations and whether you need to lodge a Development/Building Application (www.dlg.nsw.gov.au).
• Consult relevant industry associations for sector specific information.
• Research your proposed venture to evaluate feasibility and prepare a business plan. It is recommended that you discuss your plans with a qualified accountant.  For lists of accountants in NSW visit www.cpaonline.com.au or www.icaa.org.au.
• Prepare a cash flow projection for the proposed business and assess your own personal finances for going into business.
• Work out the appropriate legal structure for the business (company, partnership, sole trader, trust) and check your associated tax obligations. For a list of lawyers in NSW visit www.lawsociety.com.au.
• In undertaking your research, utilise some online business services such as the business.gov.au site at www.business.gov.au.  If you are in New South Wales visit one of 18 Business Advisory Services.

Once you decide you want to go ahead with the business venture, there are some key requirements you need to undertake to successfully establish the business. Here are some things to check:

• Register your chosen business name through the Department of Fair Trading (www.fairtrading.nsw.gov.au) and/or register your company name through the Australian Securities & Investments Commission (www.asic.gov.au).
• Apply for your Australian Business Number and register for all relevant tax obligations (see taxation section).  If you intend to employ staff, register as a group employer through the Australian Taxation Office (ATO) (www.ato.gov.au).  Set up a system to comply with the ATO requirements such as suitable filing and accounting systems to maintain records for up to five years.
• Set up a business bank account (a Certificate of Registration of a Business Name will be required for the bank account) and arrange with your bank to send monthly bank statements.
• Arrange for connection of services (telephone, electricity, gas and water).
• If you intend to employ staff, obtain Awards information, establish superannuation policies, take out Workers' Compensation cover and check other relevant information (www.industrialrelations.nsw.gov.au). (See section on employing staff).
• Arrange appropriate business insurance cover and obtain quotes from agents and brokers.  Click here as a starting point.
• Register your intellectual property such as logos, trade marks, patents, copyright and designs (www.ipaustralia.gov.au).
• Negotiate and sign commercial lease/purchase documentation in consultation with your solicitor (see commercial leases section).
• You may consider joining a trade association or chamber of commerce(www.thechamber.com.au).

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The following information about buying a business will help you in deciding whether to go ahead with a purchase.

Check sales patterns; stock levels; supply channels; current and potential competition in the area; and what the growth pattern of the business has been. Does the business have a unique competitive advantage? Do a small percentage of customers represent a large percentage of sales?

Check expenses including the interest expense on your borrowings for the business and the impact of fluctuations in sales upon cashflow. Can the business generate a reasonable income? Is the depreciation claimed for the equipment reasonable?

Has stock been accurately shown at true current value and is the stock resaleable?

Are estimated profit levels adequate to warrant the risk? Account for the impact of fluctuations in sales upon profits and the effect of inflation. Check the financial records for as many years as possible. Is the gross profit declining over time? If so, this may indicate increasing competition. Check that the records have been well kept and comply with tax requirements.

Get to know exactly what you are buying. If there is an asset list make certain that you check each item off. Check the depreciation schedule for the equipment, fixtures and fittings, etc. Check the condition of equipment.

What is the book value, the market value and/or replacement value of the fixed assets? For leased equipment, check leased conditions.

Consult with various specialists familiar with the valuation of: real estate (Australian Institute of Valuers and Land Economists;  and plant, equipment, fixtures and fittings (equipment dealers and auctioneers).

Check the business' credit rating with suppliers and evaluate whether cash flow will repay your debts and provide adequate return on your investment.

What are the reasons for the sale of the business and is the seller being co-operative in supplying information? If not, why not?

Request a trial period in the business (1-2 weeks) before exchanging contracts so that you can verify sales income etc. If you are ready to negotiate, ask yourself if you feel comfortable with acquiring the business?

The draft agreement should cover the assets to be purchased, the liabilities to be assumed and when the business will be taken over. Include clauses covering availability of finance, inspecting records, receiving necessary licences and rights, and minimum trading levels being met during trial period.

Record all the cash sales and banking during the trial period to ascertain sales turnover.

The supply of a business as a going concern is GST-free if the following requirements are met:

• The purchaser must be registered, or is required to be registered for GST.
• The supply is for consideration.
• The supplier must carry on the business until it is sold.
• All of the things required for the continued operation of the business must be supplied; and
• Both parties must agree in writing that the supply is of a going concern.

Consult a legal representative about the terms and conditions of any applicable lease agreements and your associated rights. Check whether there has been any rezoning applications lodged in regard to either the intended business or nearby locations.

For advice and protection you should seek the services of a solicitor, accountant or business adviser, independent to those used by the seller.

When buying a franchise there are some other important factors to consider. As a franchisee, you enter into a long-term relationship with your franchiser. Your success will depend largely on the success of the franchiser. You are also obliged to run the business in accordance with your franchiser's system. Here are some areas you need to consider in buying a franchise.

All franchise businesses are required by law to comply with the Franchising Code of Conduct (implemented 1 July 1998 and amended October 2001). The Code has been prescribed under the Trade Practices Act 1974 and the Australian Competition and Consumer Commission (ACCC) has the responsibility of enforcing the Code.

The Code was primarily introduced to outline the rights and responsibilities of franchisers to franchisees, and includes particular requirements for disclosure of information, the provision of a cooling-off period, and unconscionable conduct.

The Code also provides mediation procedures where disputes cannot be resolved within the franchise system.  Contact ph 1800 150 667 in Australia or refer to www.fca.com.au.

Copies of the Code may be obtained from the Department of Employment and Workplace Relations website at www.dewr.gov.au or from the Office of Small Business (www.industry.gov.au).

The Office of the Mediation Adviser (OMA) helps franchisers and franchisees to resolve their problems and disputes without going to court. Contact OMA on ph 1800 150 667 in Australia or refer to www.mediationadviser.com.au.

• Check whether there is demand in the marketplace for the business of the franchise and make sure you get a complete description of the business.
• Check the track record of the franchiser, current motives for franchising and evidence of the franchiser's strategic plan. Find out what the franchiser has to offer by way of name, product, reputation, site location, advertising budget and back-up.
• Check whether the franchise offers geographic exclusivity.
• Check how other franchisees are faring in the same business.
• Make sure you understand all the franchise fees involved including percentage of takings you have to pay to the franchiser; terms of sale for goods supplied by the franchiser and if you can purchase stock from outside the franchise network.
• Make sure you understand the franchise agreement and the period of the franchise. This includes the obligations on both parties when the franchise is terminated. You may like to ask the franchiser the number of agreements terminated recently and the reasons.
• Check whether there is a franchise operations manual.

For further information on Franchising matters contact the Franchise Council of Australia Ltd, NSW Chapter, Box Q841, QVB Post Office, Sydney NSW 1230, ph 9422 2082, fax 9422 2977 or website www.fca.com.au.

In New South Wales there are some regulatory and legal requirements involved in establishing a business. These relate to identifying the business structure, registering the business and obtaining the relevant licences, as well as meeting your legal obligations with regard to commercial leases and employing staff.

The following information will help you understand and identify some of the key requirements.

There are a number of different ways you can structure your business and it is important to consult with your accountant or solicitor before making the decision. As a general rule, the more complex the business structure, the more expensive it is to establish. The most common business structures are: Sole Trader; Partnership; and Proprietary Limited Company.

Sole Trader
If you conduct your business alone, without a partner, then you are classified as a sole trader. This definition applies whether or not you have employees working for you.

Partnerships
A partnership is defined by the NSW Partnership Act 1892 (updated August 2001) as the relationship which exists between persons carrying on a business in common with a view to profit. It involves an agreement between two or more parties to enter into a legally binding relationship and is essentially contractual in nature.

A written partnership agreement sets out the special conditions applying to the partnership. It is advisable to have a solicitor prepare the partnership agreement to protect rights of all partners. For information on partnerships, refer to the Department of Fair Trading website at www.fairtrading.nsw.gov.au or phone 9619 8700.

Proprietary Limited Company
The Australian Securities and Investment Commission (ASIC) is the single national regulator of Australia's companies. Contact ASIC if you are forming a company (www.asic.gov.au or ph 1300 300 630 in Australia).

Under the Business Names Act (1962) every business name must be registered, except where the name is simply that of the owners.

If you alter your name, add anything to it or use a different name, then it must be registered. Business names are registered by the Business Names Registration Centre, ph 9286 0007.

There are certain names that will not be registered. Generally a name that is already registered cannot be adopted by another organisation. Additionally, names that are misleading or offensive will not be registered.

The NSW Department of Fair Trading registers business names.  Refer to the Department of Fair Trading website at www.fairtrading.nsw.gov.au.

The Department of Fair Trading's Business Licence Information Service is a onestop shop to access both NSW and Commonwealth Government licence and permit information, together with any relevant documentation.

The service can be accessed via the Internet at www.fairtrading.nsw.gov.au and selecting the Business Licence Information Service icon or at www.bli.net.au.

Alternatively, contact the Department of Fair Trading on ph 13 32 20 in NSW.

Local government regulations may also apply for your proposed venture.  Local government regulations can be obtained from your local council. (Refer to website www.dlg.nsw.gov.au for a list of local councils.)

The terms of a lease are negotiable. The lease you end up with will depend on the state of the property market and on the negotiating strength of the parties concerned.

Before you move into leased premises, obtain a copy of the proposed or existing lease and discuss the implications of every clause with a solicitor. The lease should identify exactly the premises and all parties to the lease. The date for the commencement for the lease and the date of expiry should be clearly stated, plus any options for extending the period of the lease.

No mandatory controls currently exist on leasing commercial and industrial premises, beyond contract law. Conditions under which you occupy the premises must be contained in your lease.

For a business owner, the permitted uses clauses in the lease are the most important. They refer to the main use to which the premise is to be put – it is usually interpreted strictly and could restrict you from diversifying your business.

The lessee must pay for the preparation costs of the lessor, as well as his/her own.

The lessee is also responsible for Government stamp duty on the lease and all insurance unless otherwise stated.

For further information about commercial leasing in NSW, contact the Retail Tenancy Unit on ph 8222 4800 or ph 1300 795 534 in Australia.

The Real Estate Institute of Australia (REIA) is the national professional association for the real estate industry. For further information about commercial property, refer to the web site at www.reiaustralia.com.au.

If you intend to employ staff in your business, it is important that you understand the associated regulatory requirements.

In Australia there are Federal and State industrial relations systems that define the employment conditions of employees. Under both systems, minimum employment conditions are defined in Awards. An Award typically covers conditions of employment such as wages, hours of work, paid leave and notice of termination and severance payments. Flexibility in employment conditions can be negotiated under provisions available in both industrial relations systems.

To find out more information on awards and enterprise agreements in New South Wales visit the website of the NSW Department of Industrial Relations at www.industrialrelations.nsw.gov.au. To find out about awards and enterprise agreements at the Federal level visit the website of the Australian Industrial Relations Commission (for awards) at www.wagenet.gov.au.

Anti-Discrimination Laws
In NSW it is generally against the law for you, or any of your employees or agents, to discriminate against or harass job applicants, employees, or those you provide services for, on the basis of their (or any of their colleagues', friends' or relatives') sex, pregnancy, marital status, race (including colour, ethnic background, descent, national identity and ethno-religion), homosexuality, disability, transgender or age.

The NSW Anti-Discrimination Board administers the Anti-Discrimination Act 1977.

For further information, refer to the website at www.lawlink.nsw.gov.au/adb.

Safety and Workers' Compensation
Minimum standards exist for physical working conditions to ensure occupational health and safety (OH&S). It is compulsory for all employers to insure for workers compensation liability. Anyone employing others must obtain an insurance policy that covers the full amount of the employer's liability under the Workplace Injury Management and Workers Compensation Act 1998 and the Workers Compensation Act 1987 in respect of all workers employed. For more information, refer to the NSW Workcover website at www.workcover.nsw.gov.au or ph 13 10 50 in NSW.

Superannuation
It is compulsory in Australia to provide for superannuation contributions. The current minimum level is 8% and from July 2002 will increase to 9% of employee’s gross income. Employers who do not make contributions on behalf of employees are required to pay a superannuation guarantee charge to the Australian Taxation Office (ATO). For specific details on your obligations, visit the ATO website at www.ato.gov.au, or seek information from an insurance company or industry association.

To assist you in finding staff you could contact a Job Network Office (www.jobnetwork.gov.au) and find out what assistance they can provide. Another option is to use a private employment agency. Private agencies typically charge between 10% and 15% of the employee's first year's salary as a fee.

The following information covers the general taxation requirements. Please note that it is not an exhaustive list and other taxes may apply to your business. It is in your interest to fully understand all of your taxation obligations before starting your business.

Goods and Services Tax
The Goods and Services Tax (GST) applies at the rate of 10% on the supply of most goods and services consumed in Australia. The GST is levied at all stages of the production, manufacturing, distribution and retailing processes and also includes the provision of services. GST is a tax on the "value added" to goods or services at each stage of their production and distribution. The GST system provides for input tax credits for the amount of tax levied at the earlier stage i.e. a business can claim a credit for GST paid on its business inputs.

GST can only be charged by entities, which are registered for GST purposes. A business must register for GST by firstly obtaining an Australian Business Number (ABN). GST registration is required by law if the business’ annual turnover is $50,000 or greater. The issue of whether to register or not for those with a turnover of less than $50,000 is up to the individual business. It is recommended, however, that all businesses register and obtain an ABN as businesses are required to deduct withholding tax at 48.5% on business transactions relating to non-ABN registered entities.

Tax Invoices
A tax invoice is the document that denotes the amount of GST paid on a supply or purchase and its receipt is mandatory for a business to be able to claim an input tax credit. To be a "tax invoice", an invoice must contain certain information such as description of service, price, date of supply, ABN etc. Further details are available from the Australian Tax Office (ATO) website at www.ato.gov.au.

Reporting and Paying Tax
The Pay As You Go (PAYG) System applies to the process of paying tax on the business’ income and in deducting employees’ income tax obligations from their pay.

Refer to the ATO website for more information.

Under tax law, a person carrying on a business must keep records that record and explain all transactions.

• Have an Australian Business Number (ABN).
• Account for employee’s income tax.
• Withhold from payments to other businesses that don’t quote their ABN.
• Account for business expenses it claims as deductions.
• Keep business records and report and pay tax.

Income Tax
Income tax is levied on the taxable income of a person or business and is paid to the Commonwealth Government. The Company Tax Rate is calculated as 30 per cent of the taxable income earned by the company during the financial year.

Further Information
The Commonwealth levies a range of taxes including capital gains tax and fringe benefits tax, and provides for a number of rebate schemes.

The Australian Taxation Office (ATO) website at www.ato.gov.au provides information on all business tax issues and is the main ATO site relating to GST.  The site contains publications, rulings and other general tax information for small businesses.

Once in Australia, you can also phone the ATO infolines for answers and advice about various tax issues, or ask for a publication to be mailed to you. (These are Australian phone numbers only.)  Income tax and general small business enquiries – ph 13 28 61.  Most small business taxation issues, including deductions from employees’ wages, business deductions, and account information for activity statement lodgment and payment enquiries.

Tax reform for small business – ph 13 24 78.

Preparation of activity statements, GST, ABN, PAYG instalments, PAYG withholding, wine equalisation tax, luxury car tax, charities reforms and other reforms of the New Tax System.

Fringe benefits tax – ph 13 33 28

Capital gains tax – ph 1300 137 619

Superannuation – ph 13 10 20

Diesel Fuel Infoline – ph 1300 657 162

Diesel and Alternative Fuels Grants Scheme, Diesel Fuel Rebate Scheme, GST Special Petroleum Credit and Petroleum Oil Stewardship

State and Territory taxes include stamp duty, pay-roll tax and land tax. For further information about NSW state taxes refer to the NSW Office of State Revenue web site at www.osr.nsw.gov.au, email services@osr.nsw.gov.au or ph 9689 6200.

NSW businesses selling directly to consumers need to comply with New South Wales Consumer Protection Legislation. Similar legislation also exists in other Australian States and Territories. This legislation seeks to protect consumer interests and covers such areas as product safety and trade practices.

For information about Consumer Protection Legislation, refer to the Department of Fair Trading website at www.fairtrading.nsw.gov.au to obtain a copy of "Taking Care of Business".

The Australian Competition and Consumer Commission (ACCC) is an independent statutory authority which administers the Trade Practices Act 1974 and the Prices Surveillance Act 1983. Refer to the ACCC website at www.accc.gov.au for information about your legal obligations regarding trading practices and pricing.

A number of business insurance covers are available in Australia. Some of the insurance is compulsory and it is recommended that you discuss your insurance options with insurance providers or an insurance broker to ensure you purchase the appropriate insurance coverage for you business.

As a starting point in planning your insurance requirements, refer to the information here.

The main types of insurance policies include:

• Fire insurance
• Business interruption or loss of profits insurance
• Burglary insurance
• Personal accident or sickness
• Fidelity insurance
• Money
• Public risk
• Electronic equipment insurance for computers
• Machinery breakdown
• Professional indemnity
• Product liability

Worker’s Compensation Insurance is compulsory for all businesses employing staff. WorkCover is the workers’ compensation system in New South Wales and is administered by the NSW WorkCover Authority (www.workcover.nsw.gov.au).

It is now compulsory to provide for employee superannuation. The minimum level of contribution from 1 July, 2002 is 9% of employees’ gross income.

The Law Society of New South Wales accredits solicitors as Business Law Accredited Specialists. There are over 1,000 Business Law Accredited Specialists located in major centres across NSW.  For the name of a specialist in locations you should contact the Law Society, Specialist Accreditation Section on 9926 0305 or 9926 0383, or visit the Society's website at www.lawsociety.com.au.

To assist and guide you in the selection of an accountant, you may wish to contact one or more of the following professional bodies:

CPA Australia at www.cpaaustralia.com.au; ph: 9375 6200.

Institute of Chartered Accountants in Australia at www.icaa.org.au; ph: 9290 1344.

Association of Taxation and Management Accountants at www.atma.com.au, ph: 9799 6255.

National Institute of Accountants at www.nia.com.au, ph 9299 3052.

Australian Securities & Investments Commission (ASIC) 1300 300 630 www.asic.gov.au

Australian Taxation Office:
General Income Tax/Small Business Enquiries 13 28 61 www.ato.gov.au

Australian Retailers Association www.ara.com.au

Austrade – Sydney 13 28 78 www.austrade.gov.au

Australian Bureau of Statistics 9268 4111 www.abs.gov.au

Australian Customs Service Information Centre 1300 363 263 www.customs.gov.au

Australian Standards Association 9746 4700 www.standards.com.au

Australian Competition & Consumers Commission (ACCC) 1800 802 715 www.accc.gov.au

Building Services Corporation 9829 1885

business.gov.au (one stop business information) 13 28 46 www.business.gov.au

Business Licence Information Service (BLIS) 13 32 20 www.fairtrading.nsw.gov.au

Business Name Registration Centre 9286 0007 www.fairtrading.nsw.gov.au

Centrelink 13 28 50 www.centrelink.gov.au

Chamber of Commerce - State www.thechamber.com.au

Commonwealth Development Bank 13 22 21

Copyright Council 9318 1788 www.copyright.org.au

Co-operatives Registry Office 9895 0716 www.fairtrading.nsw.gov.au

Department of Industrial Relations – Federal 1800 451 462 www.dewr.gov.au;  State 13 16 28 www.industrialrelations.nsw.gov.au

Employment Awards (see Department of Industrial Relations) 13 16 28 www.wagenet.gov.au

Enterprise Agreements (State) 9243 8891 www.industrialrelations.nsw.gov.au

Export Finance and Insurance Corporation 9581 2643 www.efic.gov.au

Franchise Council of Australia www.franchise.org.au

Innovation Advisory Centres

Inventors Association of NSW 9716 0055 www.ausinvent.com

IP Australia 13 10 10 www.IPAustralia.gov.au

Job Network – Recruitment www.jobnetwork.gov.au

Land Titles Office 9228 6666 www.lands.nsw.gov.au/land_titles

Law Society of NSW 1800 357 300 www.lawsociety.com.au

NSW Business Chamber 13 26 96 www.australianbusiness.com.au

NSW Department of Local Government www.dlg.nsw.gov.au

Members of Parliament www.parliament.nsw.gov.au

NSW Office of State Revenue 9689 6200 www.osr.nsw.gov.au

Occupational Health & Safety 13 10 50 www.nohsc.gov.au

Office of the Mediation Adviser 1800 150 667 www.mediationadviser.com.au

Office of Small Business (Commonwealth) www.industry.gov.au

Real Estate Institute of Australia www.reiaustralia.com.au

Regional Development Boards www.business.nsw.gov.au

Retail Tenancy Unit 1300 795 534 www.retailtenancy.nsw.gov.au

Business Advisory Services (State) 1300 650 058

TAFE (technical and Further Education) www.tafensw.edu.au

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