Tag Archives: legal

Renting premises and negotiating the lease

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You have found the perfect place to rent for your business, and it’s time to sign a commercial lease.  This guide looks at what you need to know about renting premises and negotiating the lease.

A commercial lease is a legal agreement between the owner of a commercial property and someone who wants exclusive use of it for a set period. It normally applies to a retail store, office, industrial unit, warehouse or factory.
A retail lease is a commercial lease used for retail shop businesses. Unlike explicit commercial leases, retail leases attract additional protection under State-based legislation. Generally, a lease will be governed by the relevant State Act if the retail premises is in a shopping centre.

WHY should I not just sign straight away when renting premises?

Your business must abide by the terms of this lease, which could ultimately determine your success or failure. Indeed, the lease terms are just as important as finding the right property. Please read our guide on finding the right property.

WHAT questions should you ask before signing the lease?

  • What is the permitted use of the premises? Check if any zoning restrictions may prohibit your business activity.
  • What is the lease cost per month?
  • What additional outgoing costs may be payable? You should request a breakdown of likely outgoings in addition to rent. These might include maintenance, cleaning, and repairs on your departure.
  • Are there any incentives?  Fit-out subsidies, rent-free or ret reduction periods.
  • When does the lease end, and is there an option to renew?
  • How much is the security bond? This is normally negotiable.
  • Do I have to provide a Personal Guarantee?  In an extreme case, you could be asked to put your house as collateral to ensure rent is paid (you do not have to agree)
  • What is the lease duration, and what are the renewal options? Your business’s goodwill can easily become associated with a location, so an option to extend protects that. Conversely, if things don’t work out, you may want a short lease as a new business. So, a one-year lease with an option for a further two years might be the answer.
  • When are rent reviews, and how often? This is the time you get to negotiate, as it will affect your cost increases in the future.
  • Do you have to pay promotional or marketing funds? If you have a retail lease, be aware of your obligations to contribute to marketing funds for the shopping centre.
  • What are the refurbishment requirements? A shopping centre may require you to refurbish every x years.
  • Who will pay to create the lease?
  • Does the agreement allow the lease to be terminated early?
  • Can the premises be assigned or sub-let?
  • Does the landlord have a mortgage on the premises, and has the lending authority approved the lease?

HOW do I take out a commercial lease?

Negotiation is possible with a commercial lease. The ability to negotiate depends on how long the property has been vacant, how eager the landlord is to find a tenant, and how many other potential parties are trying to secure the property.

Ensure the landlord owns the property they are attempting to lease and confirm which part is being leased. This last step is important if there are multiple tenants.

Before you sign, ensure you have all the necessary information and have done all the necessary searches. As we have seen, this legal document can be complicated, and you should get good financial and legal advice.

The savings they help negotiate from incentive terms, including fit-out, rent, signage, marketing and advertising fees, and profit-sharing arrangements, might pay for experienced legal advisor fees.

The most common disputes arising from leases revolve around renewal options, mechanisms for rental price increases, repairs, maintenance, and removal at the end of a lease.

HINTS

Ensure you have a clause in the lease agreement giving you the right to quiet enjoyment of the premises during set hours  (for example, what if a noisy neighbour moves in)

Have the premises independently inspected before signing a lease. You and the owner should accept a condition report, including photographs. This report is useful if a dispute arises when the lease ends about the condition of the premises or equipment and whether this has been caused by fair wear and tear.

You should seriously consider the risks associated with redevelopment and relocation. If you cannot negotiate adequate compensation, consider whether the potential risks for your business make it worth entering into the lease.

Document everything to avoid issues at the end.

Your lease likely requires you to have valid public liability and plate glass insurance, so ensure your insurance is kept up to date.

SUMMARY – negotiate the lease for renting premises

A lease’s fine print is as important as finding the right property.  Get the right financial and legal advice to help you interpret and negotiate the lease. Document everything to help avoid issues when renting premises.

Gift cards – why you should offer them!

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A gift card is a convenient way for a customer to provide a gift to a friend, family member or business associate. They are most commonly used for gifts when you don’t know what to buy someone. Interestingly a survey done in 2017 by finder.com.au found that one in seven gift cards purchased in Australia went unused. This guide will look at why you should offer them, what are the rules you must abide by and how you go about offering them.

A gift card, gift certificate or gift voucher is a prepaid stored-value money card or certificate, usually issued by a retail store or bank, to be used as an alternative to cash for purchases within a store or related businesses.

WHY should I offer gift cards?

Gift cards offer several advantages for small businesses; the cost to provide them is minimal compared to their potential return. Consumers generally feel a gift card is an opportunity to spoil themselves.

Small Business Advantages include:
  • Give customers an incentive to spend money at your business and create repeat purchases.
  • Revenue is generated in advance sales as no goods or services are redeemed yet.
  • Having customers carry a gift card around with your logo builds your brand.
  • In most cases, customers will spend more than the gift card amount.
  • Gift cards provide you with a promotional opportunity. Spend $100 and get a $10 gift card.
  • Customers may never actually spend the value of the card, whether it be the last few dollars on a card or the whole amount.

WHAT are the Rules around gift cards or vouchers?

As of November 2019, the rules changed around gift cards. The rules now state that a gift card must have a minimum expiry date of 3 years from the date the card is sold. That expiry date must be listed on the card and no post-purchase fees can be added. A post-purchase fee would include activation, account keeping or balance enquiry fees. Penalties for non-compliance are $6,000 for an individual and $30,000 for a business.

When you sell a gift card/voucher, the customer has an asset of your business until the voucher is used. Thus, from an accounting perspective, when you record the sale of a gift voucher, it needs to be recorded as a liability posted to an Unclaimed Gift Certificate account. When the customer redeems the voucher, all you need to do is create an invoice and pay for it using the funds from the Unclaimed Gift Voucher account. This way, you can easily track the value of outstanding gift vouchers or write off any that remain unredeemed after the expiry date.

From a GST perspective, a gift card has a monetary value but does not need to be included in your GST activity statement until it is redeemed for products or services. The exception to this is when a gift card is not for money but rather a tangible product or service, then GST must be paid and reported on the voucher sale. For example, 10 hours of technical services.

 If the voucher expires before it’s redeemed, you’ll need to report the unredeemed amount as income and 1/11th (being the GST component) is reported and paid to the ATO.

HOW do I offer gift cards?

The three most common forms of gift vouchers/cards are:
  1. A credit card-sized plastic card electronically loaded with a specific money amount. Note that some cards can have additional funds added or topped up later.
  2. A gift certificate is some form of a paper promise from a business allowing you to redeem the specified amount back from the store.
  3. eGift cards or vouchers. This is normally a set of codes and sometimes a barcode that you can receive via email. These codes/barcodes can then be applied at the checkout for credit.
As a small business, you should consider the following:
  • Which type of cards you will offer as above?
  • How do you tell customers they are available? Signs, internet, etc
  • Will you restrict to set values or variables? Such as $50, $100 and $200?
  • Will the expiry be 3 years or more?
  • Can it be redeemed in your online store if you have one?
  • If you have multiple stores using the same brand, is the gift voucher transferable?
  • Integrating your POS and Accounting systems allows you to process and track these vouchers simply. (most have this functionality)
  • Are there any special terms? Such as not allowing gift cards to be used to buy gift cards or transferable for cash.

Some plastic card solutions make it simple to activate and redeem cards by simply swiping the card through your EFTPOS reader. Other solutions will require some other type of solution, like keying in a number. Be wary of a manual system that can be lost or stolen.

You can brand your gift cards by having a custom gift card printed by various companies for less than $1 each. However, note some POS software solutions require you to use their gift cards which may cost more.

HINTS

If you sell gift cards, make sure to showcase them in a highly visible place that customers must walk by. For example, placing gift cards next to the sales desk will lead to more impulse buys from customers.

SUMMARY – gift card solutions

Offering gift cards allow customers a convenient way to provide gifts to others. A small business benefits from having the money upfront and encouraging repeat visits to the store. Tracking and accounting is key to managing them with POS and accounting package companies offering solutions.

Registry Australia Scam

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We normally associate scams with an overseas entity randomly targeting you when we think of scams. Still, Registry Australia is an Australian company mining real data from ASIC. The Registry Australia scam encourages you to pay twice as much to reregister your business name renewal.

Small Business Answers owns more than one business name, and one of those names came up for renewal. In the mail, we received an official-looking letter indicating our business name was expiring next month, which it was. This letter provided payment details for a 1-year renewal for $99 or 3 years for $189. Thentwo2 weeks later, an email arrived from ASIC, the official government body for business registrations, indicating the same but at the cost of $39 for one year or $82 for three years.

Registry Australia claims to be Australia’s leading and most reliable business registration service in their letter and offers you an online portal and automatic renewal notifications. ASIC provides an online portal and sends you automatic renewals. Registry Australia states they are independent of ASIC, and you are not required to pay any money. Still, as with all scams, youmust pay attention andy read this information in the letter.

Unfortunately, nothing stops Registry Australia from obtaining business renewal information from ASIC. Then contact you in the hope that you will pay them more money for them to pay ASIC the $37 or $88 on your behalf to reregister your business name.

Small Business Answers advise ignoring this correspondence from Registry Australia and only dealing with the official government channels. Besides that, overthree3 years, you will have an extra $111 in your pocket rather than funding a scam.

For more information on the official government method of registering a new business name, see Small Business Answers guide to Register a Business Name. ASIC also has a page on Scams

Intellectual Property & Trademarks

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The best idea in the world is useless if someone else copies it and they benefit from it. Similarly, just because you register a business name in Australia does not mean it is protected. This guide will look at intellectual property & trademarks, what you need to know about protecting your ideas or brands, and how you protect them.

Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognise it more than others. The most well-known types are copyrights, patents, trademarks, and trade secrets.
A patent is a form of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of years in exchange for publishing an enabling public disclosure of the invention.
A trademark is a type of intellectual property consisting of a recognisable sign, design, or expression which identifies products or services of a particular source from those of others, although trademarks used to identify services are usually called service marks.
Wikipedia

WHY should I protect my ideas and brand?

Let us assume you have registered a business name and set up an internet domain. For example, you own the business name GREAT PLUMBER and the internet domain greatplumber.com.au. This does not preclude someone else from writing great plumber on the side of their van.

If, however, you owned the Australian trademark for great plumber, you could take legal action to stop them from using the words great plumber.

You can apply for a patent if you invent something or have an idea you do not want anyone to copy, and this will give you protection so you might generate earnings from your patent. A patent allows you to stop others from manufacturing, to use, and/or selling your invention in Australia without your permission.

Other types of IP not covered in this guide includes copyright (for example, music), registered design (such as the shape of a product), circuit layout rights (for example, circuit board design), and plant breeders rights (such as a new plant variety)

WHAT do I need to know about patents and trademarks?

Patents

If you wish to discuss your idea with anyone before a patent is issued, you should ensure they have signed a confidentiality agreement. If you have not kept your idea/invention a secret, there is a chance a patent will not be issued.

There are two kinds of patents:

  • Standard Patent – provides up to 20 years of protection and control over an invention. The invention must be new, have an innovative step and be made by or used in industry. Your claims will be examined, and expect the process to take from 6 months to several years. Application fees start at around $400.
  • Innovation Patent – The Australian Government has decided to stop offering innovation patents from 25 August 2021. It is a patent that protects an invention for up to eight years, and it is not as stringent in its requirements as a standard patent and can get approval much more quickly.
Trademarks

A trademark can be a unique symbol, word(s), sound, number, image, or scent used to represent a business or its products. Once you register a trademark in Australia, it gives you the sole right to use, license or sell it to others in Australia. Expect the trademark process to take at least seven months and cost more than $200.

It is possible to register a trademark in different industries by different people, such as Dove chocolate and Dove soap.

If you do not use your trademark, it can be removed on the grounds you are not using it.

HOW do I apply for a patent or trademark?

To apply for a patent or trademark, you must be authorised to do so by the owner/inventor and be planning to use it.

Your first step should be to check if anyone has already applied:

Trademark search https://search.ipaustralia.gov.au/trademarks/search/quick

Patents search https://www.ipaustralia.gov.au/patents/understanding-patents/searching-patents

Patent Applications

Although you can apply yourself, we strongly recommend you use the services of an attorney to increase your chance of success. https://www.ipaustralia.gov.au/patents/engaging-an-attorney-toolkit

A provisional application can also be filed, which helps prove you were the first to come up with an idea before a patent is approved.

You can apply for a patent through a patent attorney, on the IP Australia website and in writing. More details can be found here: https://www.ipaustralia.gov.au/sites/g/files/net856/f/patent_application_guide.pdf.

Trade Mark Applications

Assuming you have checked your trademark is available, you can visit IP Australia and make an online application where you will have two choices for your application:

  • TM Headstart – for a higher fee, you can get assistance with your application and the ability to make changes before your final review
  • Standard – application for formal review

The Australian Government provides a special portal to further help you with your understanding and application here  http://trademarks.business.gov.au/assist/welcome.

HINTS

Although the idea of having IP protection is good, you may end up in a situation where the time, effort and money involved outweigh the commercial benefit.

This guide has discussed registering IP in Austral a. If you wish to have those same protections overseas, you would need to consider IP protection in each country you want.

Visit IP Australia’s website to use the IP Toolkit https://www.ipaustralia.gov.au/tools-resources/ip-toolkit.

You can look at alternative dispute resolution or take the matter to court if you believe your IP has been infringed.  More information can be found at IP Australia https://www.ipaustralia.gov.au/ip-infringement/enforcing-your-ip.

SUMMARY – Intellectual property and trademarks in Australia

If you want to protect your brand’s intellectual property and trademarks or ideas, you will need to register a trademark or pate t. Registering a trademark is a much simpler process and can be done yourself. But it is strongly recommended you get professional assistance if you wish to register a patent. Be prepared to wait six months to several years to get the protection approval. Note that it will only be for Australia and not other countries.

Buying a Franchise guide

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 Have you always wanted to start your own business but never had the confidence or the knowledge to do so? Is this a career change, and is it right for you? Buying a franchise may give you confidence and support in selling a proven offering. This guide will examine the pros and cons of buying a franchise and help you identify the right franchise opportunity.

A franchise is a business opportunity that allows the franchisee (possibly you) to start a business by legally using someone else’s (the Franchisor’s) brand, expertise, ideas, and processes.
Australia has three times as many franchised outlets per capita as the USA. Well-known franchises include McDonald’s, Subway and Jim’s Mowing.

Also, see our essential guides on starting and buying a business.

WHY consider buying a Franchise?

Franchises are offered in almost every industry in Australia. As an investor, you buy into an existing brand which, if you tried to set yourself up, could take years to get into the same position.

Depending on which franchise you are interested in joining, there is no guarantee that you will be accepted as a franchisee. It can be quite competitive, especially when it comes to location and also due to franchisors selecting the franchisee they believe will make the business a success.

It would help if you considered the following:
Advantages
  • Association with an established brand, reputation, product or service
  • Assistance with lease negotiations, site development, and shop fit-out
  • Assistance with buying equipment
  • Initial management training and ongoing support
  • Advertising and marketing support
  • Access to established standard procedures, operating manuals and stock control systems
  • Access to financial systems
Disadvantages
  • Less autonomy when making business decisions (franchisees generally must operate according to a standard operating manual)
  • You can only operate in a restricted territory
  • Paying ongoing fees to the Franchisor
  • Having to use specified suppliers
  • Less control if you sell your franchise; you will be required to follow certain procedures, including having your buyer approved by the Franchisor
  • Restraint of trade provisions (limiting the actions you can take) when the franchise ends
  • At the end of the agreed period, the Franchisor is not required to renew the franchise, in which case the business and its goodwill go back to the Franchisor

WHAT do I need to know about franchising?

There are three types of franchises:
  1. Business – You have the right to use the Franchisor’s intellectual property in your industry. An example is Boost Juice.
  2. Product – You sell the Franchisor’s product or service from a wholesale or retail outlet with exclusive rights within a specific area, for example, Jim’s Mowing or a Mazda dealership.
  3. Processing or manufacturing – You manufacture the product, and the Franchisor provides an essential ingredient or know-how, such as Coca-Cola.

The Franchising Code of Conduct regulates franchising in Australia. The Code is mandatory and governs the conduct of franchising participants towards one another. It covers:

  • Disclosure requirements – the Franchisor must be provided
    • When interested in acquiring a franchise
      • Information statement – 2-page document covering risks and rewards.
    • If you decide to proceed
      • Disclosure document – costs, supply restrictions, and contract details of existing and former franchisees.
      • Franchise agreement – legally binding document between you and Franchisor.
  • Good faith obligations – how you act to one another
  • Dispute resolution mechanism – if a dispute remains after three weeks, either party can refer the matter to mediation
  • Cooling-off period for potential franchisees – you cannot sign for 14 days after receiving documents, and you can terminate the agreement up to 7 days after signing
  • Procedures for ending a franchise agreement – set out the terms for termination, renewal, end of term and transfer of the franchise

Some franchise systems require their franchisees to buy certain products from them or their specified supplier, known as supply restrictions. You might have no choice about where to buy some products.

The entry price of a franchise may seem like a good deal, but there may be further costs that you have to pay to establish and run your franchise. It’s important to understand the total costs you might have to pay.

HOW do I evaluate before buying a franchise?

If you buy into a franchise, investing in advice from a lawyer, accountant, or business advisor with franchise experience will help you make a better decision. You should, however, consider the following when evaluating a franchise:

  • Consider the effect on your family and lifestyle
  • Question if the business interests you and if you are comfortable with investing
  • Research the business. This may include getting expert advice.
  • Age, size, uniqueness and reputation (including management team) of the franchise
  • Understand all costs and fees beyond the initial outlay
  • Understand franchisor directives around logos, uniforms, and future capital investments like a compulsory store refresh
  • Be aware of what marketing support is provided and what your contribution will be towards that
  • Ask to see demonstrations of processes or technology
  • Understand how area territories work and if they are exclusive; thus, you will understand the competition from your franchise. Location is important.
  • Understand what training is available
  • Is the Franchisor a member of the Franchise Council of Australia, as this imposes certain ethical standards
  • Ensure what you receive in writing matches what you have been told verbally
  • Speak with existing and past franchisees to see if the opportunity has lived up to expectations
    • What’s the work like?
    • Any unexpected costs?
    • How is the supply of products or services?
    • What problems have you encountered?
    • How supportive is the Franchisor?
    • How was the training?
    • Was it a good investment?
  • Ask about compliance checks performed by a franchisor
  • Consider what your exit strategy looks like

HINTS

Don’t assume the franchises will be a success.

Don’t assume you will not have to work hard in the business.

Understand your reputation is affected by the Franchisor, for example, 7Eleven underpaying employees.

Guides from the ACCC to help franchisees and prospective franchisees understand some of their rights and responsibilities under the Franchising Code of Conduct. https://www.accc.gov.au/publications/franchising-what-you-need-to-know

Franchise start-up checklist https://www.accc.gov.au/system/files/The%20franchisee%20manual__Mar%202019.pdf

Free pre-entry franchise education program https://www.franchise-ed.org.au/online-courses/pre-entry-franchise-education/

The Franchise Council of Australia has some further resources on this subject. https://www.franchise.org.au/

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) can assist in resolving franchising disputes. https://www.asbfeo.gov.au/franchising-disputes

SUMMARY – buying a brand, expertise, and processes

Buying a franchise can be a great way of starting your own small business. It comes with the security of an established brand, expertise, ideas, and processes. However, you will have less autonomy. The mandatory industry franchise code of conduct helps to protect all parties and provides a mechanism to resolve disputes. Before buying a franchise, do your homework carefully and consider using the services of an expert in franchising. 

Selling a small business

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When we start a small business, we all dream of how much money we will make and at some point, we hope to sell it and enjoy the high life. The selling process can be overwhelming and time-consuming; this guide will explain the basics and help you decide how to move forward.

Selling your business is the process of putting your business up for sale by an owner or owners. Just as you needed a plan to get into business, you’ll need a plan to get out of it.

WHY are you selling your business?

Selling your business is a very emotional decision, and you must have thought this through. Remember that the first question a prospective buyer is going to ask is, why are you selling?

If you are selling because of financial stress, an alternative may be to speak with your accountant or business advisor first.

When selling, you must also decide exactly what are you selling?

  • Do you want to sell everything?
    • Do you want to walk away?
    • Are you prepared to stay on for a period to help with the handover?
  • Are there any assets you do not want to sell? for example, a car
  • Does the sale include your registered business name?
    • Will you agree not to compete?
  • Do you have some business’ intellectual property (IP) that you want to sell?
  • If you own property associated with the business will you keep that?

WHAT is the value of your business?

Like selling a house, you probably don’t know its true value. If selling, you will need to value it, which cannot include your emotional attachment. Otherwise, you could easily price yourself out of the market. T value and sell a business you can attempt to do it yourself, or you can get professional advice from the likes of your accountant, business advisor, or a business broker.

Beyond understanding the financials, you will need to consider goodwill, including the intellectual property of the business, any plant and equipment, including digital assets of the business, and any stock or inventory that the business owns.

There is no single business valuation method, instead of a number that can be used singularly or combined. S e of the more popular include:

  • Book value – Subtract liabilities from the assets. For example, if you have $100,000 in assets and $30,000 in liabilities, the value of your business is $70,000.
  • Return on Investment (ROI) – uses the formula ROI = (net annual profit/selling price) x 100.  If the selling price was $100,000 and your annual net profit was $10,000 your ROI would be 10%.  Thus a buyer could expect to get 10% back on their money based on an investment of $100,000.
  • Market value – This is how much someone is prepared to pay for your business. It is market and industry-specific so it is worth researching your industry.
  • Goodwill – A business may only be worth the reputation of one employee and if that is you, and you leave, goodwill is what the business is now worth.  Customer loyalty and brand reputation are usually factors that affect this.
  • Cost of creating from scratch – current cost if you had to start the business today.
  • Future profits – If you can predict what future profits may look like this can significantly increase the price of business if on an upward trajectory.

Note if you have not paid attention and not kept accurate records of your business, this will impact the perceived value of your business.

HOW do I sell my small business?

There are several ways to sell businesses, but the most common is through a broker. A broker will help with the whole process, including valuations, marketing, negotiations, and final sales. Some internet solutions charge a set fee, and others charge a 7-10% commission on the sale price. Mar ting costs are normally in addition. A directory of business brokers can be found here.

To sell your business, you will need to provide the following information:

  1. Financials: Tax returns (3 years), bank statements (3 years), balance sheets (3 years), accounts receivable/payable lists, salary information, financial forecasts, stock inventory and cost price, valuation of equipment and fixtures.
  2. Legal: Business registration (ABN), contracts/agreements, insurance policies, building leases, licenses, patents/trademarks, employee agreements, and records of employment, franchise agreements current loans/agreements. If it is a freehold sale, the land title, and any agreements.
  3. Operational: Marketing plans, vendor and customer database, equipment servicing receipts, website details and statistics, business procedures, training manuals, and employee manuals.

Without a broker, you would need to do the following:

  1. Value your business
  2. Prepare a marketing document on your business including history, what you sell, competition,  growth prospects, why you are selling, and contact details.
  3. Advertise the business is for sale. Word of mouth and your existing networks may also help.
  4. Deal with interested parties
  5. Be prepared to make relevant financial, legal, and operational information available as per above so the prospective buyer can do their due diligence.
  6. Prepare a contract of sale. It is highly recommended you use the services of an accountant and lawyer at this point to help prepare the documents and transfers.
  7. Determine how and when settlement will occur.

HINTS

Keep your employees up to date when appropriate.

Selling your business may result in additional obligations that need to be paid, such as employee entitlements or tax amounts from asset sales.

Normally the sale of a business is GST free.

Remember to account for asset depreciation when valuing an asset.

The Australian Tax Office offers small business owners the following Capital Gains Tax (CGT) concessions.

  • 15-year exemption – may exempt a capital gain from a business asset you have owned for at least 15 years
  • 50% active asset reduction –allows you to reduce the capital gain arising from the sale of a business asset
  • retirement exemption – allows you to receive relief from CGT if you sell active assets used in your business. Active assets include those used in the course of operating a business and intangible assets like goodwill.
  • rollover – allows you to defer a capital gain from the disposal of a business asset for two years.

SUMMARY – Consider using a business broker

Make sure you are selling for the right reasons. Work out if you want to sell everything or just parts. Decide if you will get help from a business broker to sell your business or do it yourself. Be prepared to provide all your confidential information and try hard to keep emotion out of the process.

Work Health & Safety also know as OH&S

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Prevention is better than a cure and although everyone thinks it will not happen to them, unfortunately, accidents happen! In Australia, small businesses have a duty of care for work health and safety.  This guide will help you understand how you can make your environment safer as well as what your legal requirements are to create a safe work environment.

Work Health and Safety (WHS) – sometimes called Occupational Health and Safety (OH&S) – involves the management of risks to the health and safety of everyone in your workplace. This includes the health and safety of anyone who works for you as well as your customers, visitors and suppliers.

WHY do I need to worry about Work Health and Safety?

If an employee or any type of visitor is injured while doing your business you will most likely be held liable for medical bills and lost wages. Unfortunately, some small businesses in Australia have lost their business because they did not take the proper precautions and have legislated insurance.

Benefits of having good WHS include:
  • staff retention
  • a reduction of injury and illness in the workplace
  • improved productivity and minimise disruptions
  • reduce your liability for injured workers

WHAT do I need to understand about WHS (OH&S)?

If you employ staff you need to take out workers’ compensation insurance. This insurance covers payments to workers for medical costs and rehabilitation expenses as well as lost wages if they are unable to work due to an injury or ill health. Workers compensation schemes are different by states and links for further details can be found further into this guide.

As a small business owner, you have an important role to play when it comes to championing safety. If you take the lead your employees will understand they should follow your safety procedures and raise safety issues.

You must put health and safety practices in place as soon as you start your business. Under Australian WHS laws, your business must ensure the health and safety of your workers and not put the health and safety of other people at risk. To do this you must:

  • provide a safe work environment
  • monitor the health of workers and conditions at the workplace
  • provide and maintain safe machinery and structures
  • provide safe ways of working
  • ensure safe use, handling and storage of machinery, structures and substances
  • provide and maintain adequate facilities
  • provide any information, training, instruction or supervision needed for safety
  • monitor the health of workers and conditions at the workplace

HOW do I manage Work Health & Safety Risks?

  1. Identify hazards in your workplace – look for physical (such as machinery noise), material or substance (for example, poison) and work task (like heavy lifting) hazards that may harm people.
  2. Assess risks – If an employee is exposed to one of these hazards how dangerous is it, can protection be added or controlled and should that hazard be fixed before work continues?
  3. Control Risk – look to prevent hazards when designing the process and if one is created work to remove that hazard.  The remaining risk may be minimised by using appropriate personal protective equipment and providing appropriate training and supervision.
  4. Review controls –  Schedule regular inspections to identify new hazards and ensure measures are being adopted.  Don’t wait for an issue to occur.
  5. Record and report safety issues- To begin with it identifies what is an issue and provides a record for any claims. You must keep records concerning certain hazards including:
    1. energised electrical work
    1. diving work
    1. hazardous chemicals
    1. plant
    1. equipment

A link to each state WHS laws and regulation can be found at the bottom of the page.

The WHS framework includes:
  • Act – outlines your broad responsibilities.
  • Regulations – set out specific requirements for hazards and risks, such as noise, machinery, and manual handling.
  • Codes of practice – provide practical information on how you can meet the requirements in the Act and Regulations.
  • Regulating Agency (regulator) – administers WHS laws, inspects workplaces, provides advice, and enforces the laws.

HINTS

It may be worth getting independent advice on the WHS requirements for your business.

Emergency plans and first aid – Part of WHS is being ready to respond if an accident or emergency happens. Do you have a first aid kit and someone trained to use it? If you evacuate do you know where you will safely assemble?

Extreme weather, including cold, extreme heat, hail or strong winds may affect your business. You must keep your workers safe and ensure you’re aware of the signs of heat-related illness and how to manage the risks.

You still have WHS responsibilities at a work function.  Your staff may be letting their hair down but ensure you have internal policies around acceptable behaviour, bullying and harassment in the workplace, and sexual harassment. Any alcohol should be served legally and responsibly.

Safe Work video on how small businesses can comply with WHS requirements

SafeWork NSW provides a helpful assessment tool https://www.safework.nsw.gov.au/easywhs-beta

SUMMARY – Preventative health & safety for small business

Work Health and Safety is an important consideration for your workplace including your requirement to have workers compensation insurance for your employees.

A safe environment encourages productive, happy staff.  Creating policies and plans in the event of an occurrence is a precaution that, although extra work, will help prevent and deal with any risk that may occur.  Each state has its own WHS laws and regulation.

Australian Capital Territory

Act – Work Health and Safety Act 2011 (ACT)

Regulation – WHS Regulation 2011 (ACT)

Codes – ACT Codes of Practice

Regulator – WorkSafe ACT

New South Wales

Act – Work Health and Safety Act 2011 (NSW)

Regulation – WHS Regulation 2017 (NSW)

Codes – NSW Codes of Practice

Regulator – SafeWork NSW

Northern Territory

Act – Work Health and Safety (National Uniform Legislation) Act 2011 (NT)

Regulation – WHS (National Uniform Legislation) Regulations (NT)

Codes – NT Codes of Practice

Regulator – NT WorkSafe

Queensland

Act – Work Health and Safety Act 2011 (Qld)

Regulation – WHS Regulation 2011 (Qld)

Codes – Qld Codes of Practice

Regulator – Workplace Health and Safety Queensland

South Australia

Act – Work Health and Safety Act 2012 (SA)

Regulation – WHS Regulations 2012 (SA)

Codes – SA Codes of Practice

Regulator – SafeWork SA

Tasmania

Act – Work Health and Safety Act 2012 (Tas)

Regulation – WHS Regulations 2012 (Tas)

Codes – Tas Codes of Practice

Regulator – WorkSafe Tasmania

Victoria

Act – Occupational Health and Safety Act 2004 (Vic)

Regulation – Occupational Health and Safety Regulations 2017 (Vic)

Codes – Vic Compliance Codes and codes of practice

Regulator – WorkSafe Victoria

Western Australia

Act – Occupational Safety and Health Act 1984 (WA)

Regulation – Occupational Safety and Health Regulations 1996 (WA)

Codes – WA Codes of Practice

Regulator – WorkSafe WA

Commonwealth

The Commonwealth jurisdiction covers workers for the Commonwealth Government (for example, the public service and the Australian Defence Force) and businesses licensed to self-insure under the Comcare scheme.

Act – Work Health and Safety Act 2011 (Cwth)

Regulation – WHS Regulations 2011 (Cwth)

Codes – Commonwealth Codes of Practice

Regulator – Comcare

Record Keeping for small business

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Running a small business is about understanding what is going on and about meeting your obligations. You might have obligations to employees, suppliers, the taxman or more simply an obligation to yourself to understand if you are making any money or the ability to look up a past agreement.  This guide will look at why record keeping is important, what you need to keep records on, and how to keep good records.

Record keeping is the activity or occupation of keeping records or accounts.
Record keeping in financial terms is the process of recording transactions and events in a ledger or accounting system. Since the principles of accounting rely on accurate and thorough records, record keeping is the foundation accounting.

WHY should I care about record keeping?

Keeping good records is important for any small business. Whether that is to help manage your costs, whether it is for legal, regulatory or tax reasons, or simply to help manage and improve your business.  Collecting, storing, and effectively analysing your data is vital.

Without adequate records, it would be impossible to measure the health of your business and to keep track of your progress. It also helps avoid fines for doing the wrong thing and demonstrate your financial position if you need a bank loan.

Records must be kept by law for:
  • 5 years for Australian Tax Office purposes
  • 7 years for Human Resources time and wages records
  • 2 years after you have offset a capital loss against a capital gain (individuals & small business)

Keeping good records will make running your business easier and save you time in the long run.

WHAT should I keep records on?

The types of records you should consider keeping include:
  • Client Files
  • Contracts
  • HR required records for 7 years
    • employee details including pay, leave and work hours
    • reimbursements of work-related expenses
    • workers compensation insurance for each employee
    • pay as you go (PAYG) tax instalments
    • superannuation contributions
    • ending employment
  • HR records recommended:
    • resumes and job applications
    • contracts of employment
    • performance reviews
    • trade or registration certificates
  • Business records (for example, business registration, formal meeting minutes etc)
  • General business information (for example, job tracking, customer correspondence)
  • Accounting and tax for 5 years
  • Business expenses
  • Bank statements / credit card statements
  • Annual tax returns
  • Quarterly/Monthly tax filings
  • Payroll
  • Inventory
  • Sales
  • Revenue
  • Petty cash
  • Vehicle logs
  • Invoices
  • Cancelled cheques and cheque stubs
  • Purchase orders

HOW do I make record-keeping easy?

Under Australian law records must be:
  • readily accessible if required
  • must be unchanged and must be stored in a way that restricts the information from being changed or the record damaged (changes may be permitted for correcting an error)
  • in writing (electronic or paper)
  • legible
  • in English
  • explain all transactions
  • accurate and not misleading

A bookkeeper or your accountant can help with this process but this will not remove your need to still be involved in keeping accurate records.

Although you can keep records on paper it will be much easier if you do so electronically.  Refer to our essential guides on expense management, accounting software and payroll software to understand more. If you are concerned about outlaying funds for software you could set up a series of spreadsheets to help manage your accounts.

Other key documents like signed contracts, lease documents etc should be kept in a safe preferably fireproof storage. These documents can also be scanned and stored electronically ensuring you have back up copies.  Refer to our guide on Storage and sharing of files.

Electronic solutions and storage of records have the following advantages:
  • back up records in case of disaster
  • automated processing and provide ready-made reports
  • produces taxation and employment reporting requirements for government submission online
  • keep up with the latest tax rates, laws and rulings
  • save on physical storage space

HINTS

The Australian Tax office (ATO) provides a record-keeping evaluation tool which will help you evaluate how well you are keeping your business records. https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=&anchor=RKET/#RKET/questions

The ATO provides an App for sole traders to help them record business income, expenses, and vehicle trips.  https://www.ato.gov.au/general/online-services/in-detail/mydeductions/mydeductions/

SUMMARY – keep records under Australian law

Record keeping is not just about keeping records for accounting.  Under Australian law, some taxation, superannuation and employment records must be kept for 5 or 7 years. 

Accurate and regimented record keeping will help you find the information you need, provide reporting and make running your business easier.  Modern accounting and payroll cloud-based solutions will not only streamline the process but also produce required government reporting for you.

Lack of record-keeping, false or misleading reporting can result in fines. Always ensure you have backup copies.

Australian Competition and Consumer Law

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Trust me, this widget is 10 times better than ?, environmentally friendly, and will last forever.  Reality is you cannot say this unless you can substantiate every statement. This guide will look at Australian competition and consumer law that you need to understand.

This guide is a summary of what you should consider as a small business.  It cannot be used as a definitive guide and it is strongly recommended that you further research this subject on the government websites Australian Consumer Law (ACL) and Australian Competition and Consumer Commission (ACCC). This summary does not cover every aspect.

The ACL offers consumer protections in the areas of: (1) Unfair contract terms, covering standard form consumer contracts. (2) Consumer rights when buying goods and services. (3) Product safety. (4) Unsolicited consumer agreements covering door-to-door sales and telephone sales. (5) Lay-by agreements.

The ACCC Competition and Consumer Act 2010 (the Act) is a national law that regulates fair trading in Australia and governs how all businesses in Australia must deal with their customers, competitors and suppliers. The Act promotes fair trading between competitors while also ensuring that consumers are treated fairly.

WHY should I care what the ACL and ACCC laws are?

There is significant government legislation associated with this subject and lack of knowledge is not an acceptable defence.  Significant fines apply for breaking the rules to ensure unfair activity does not occur.

WHAT Australian Competition and Consumer Law do I need to understand?

Australia Consumer Law (ACL)
  • Unfair contract terms – This protects a business or consumer when they agree to a standard contract which is subsequently deemed as unfair. For example, terms change, you agree to a price but the price is changed without notice.
  • Consumer Guarantees – applies to a consumer or business that purchases a product for less than $40,000. The guarantee is that a good or service will meet certain minimum standards. For example, a consumer buys a washing machine for $2000 with a 1-year warranty.  After 2 years the product fails.  Under ACL the consumer can claim that this product should have lasted more than 2 years and as such should be repaired or replaced.
  • Consumer product safety – As a business owner who sells a product you must be aware of mandatory standards or voluntary rules that exist around the safety of your product.  You will also have obligations around bans or recalls. For example, you cannot sell children’s toys that have small detachable parts that could be swallowed.
  • Sales practices – The ACL prohibits businesses from using unconscionable conduct when selling, unsolicited supply of goods, unsolicited consumer agreements, harassment  and coercion, or refusing to provide proof of a transaction when dealing with their customers. For example, you cannot try to trick someone into buying your service nor threaten them or refuse to give them a receipt if they ask for one.
  • Avoiding unfair business practices – The ACL prohibits businesses from engaging in unconscionable conduct including misleading or deceptive conduct and representations. For example, you cannot do an advertisement with disclaimers that are too small to read. Nor can those disclaimers change the main meaning of that advertisement, for instance, when the ad implies the item costs $50 but a condition in fine print means the real cost is $75
Australian Consumer & Competition Commission (ACCC)
  • Treating customers fairly
    • Offering warranties. A product or service must do what it says. For example, if it has a speed of 10 it must reach a speed of 10.  If you provide a warranty against defects you must comply with that warranty. A warranty against defects is provided in addition to consumer guarantees under ACL and does not limit or replace them.
    • Unfair business practices. It is illegal to engage in referral selling, pyramid selling, unfair contract terms, and accepting payment without intent to supply
    • Rules for gift cards. Cards must be redeemable for 3 years after the date of purchase and clearly show the expiry date.
    • Debt collection. It is illegal to mislead, hassle, or use physical force on someone who owes you money.
    • Selling parallel imports or grey marketing is when you directly import a product outside of a formal manufacturer distribution network. If you do you must
      •  be aware of, and comply with, product safety and labelling requirements
      • provide accurate information to consumers about the products you sell
      • ensure that you do not mislead consumers about their refund, return and warranty rights, and
      • understand your general obligations under the ACL.
  • Advertising & promoting your business
    • False or misleading statements.  It is illegal for a business to make statements that are incorrect or likely to create a false impression. This includes advertisements or statements in any media (print, radio, television, social media, and online) or on product packaging, and any statement made by a person representing your business.
    • Managing online reviews. You will be breaching the law if you do not remove fake reviews. You must disclose commercial arrangements. It is also considered misleading if you remove or edit negative reviews.
    • Door-to-door & telemarketing sales. If selling door to door you may not approach if a do not knock sticker is present and you must leave if asked. Telemarketing must fall under the Do Not Call Register Act and specified hours.  These types of sales are bound by a 10 business day cooling-off period allowing customers to cancel for any reason.
    • Country of origin claims – It is illegal to misrepresent country of origin.  Some food products must display country of origin. Businesses wishing to display Australian-made can find more details here. https://www.australianmade.com.au/
  • Pricing & surcharging
    • Setting prices is at your discretion but cannot be done in collaboration with a competing business. You may not set a minimum price which a product or service can be sold by your retailers. Selling below cost is illegal if it is found it was done so to damage a competitor.
    • Displaying prices must be clear and accurate and display the total price.
    • Payment surcharges for EFTPOS should not be excessive.
  • Anti-competitive behavior
    Business practices that limit or prevent competition are illegal.  
    • Anti-competitive conduct. Prohibits contracts, arrangements, understandings or concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market. 
    • Cartels. Agreements made with competitors to fix pricing, share tender information, or agree to restrict production is illegal. For example, two competing businesses agree to sell their product for the same price.
    • Collective bargaining & boycotts. It is illegal to agree with a competitor to negotiate with a single supplier on terms as it is to agree to boycott a supplier.
    • Exclusive dealing.  It is illegal to force another business to comply with your conditions under the threat you will withhold supply or pricing.  This could include ceasing supply if they deal with a competitor or if they keep discounting your product.
    • Imposing minimum resale prices. Suppliers may suggest a retail price that a reseller charges but cannot stop resellers charging or advertising below that price.
    • Refusal to supply products or services. Suppliers have the right to choose who they do business with however it is breaking the law if that refusal is based on one of the above anti-competitive points.

HOW can I learn more about Australian competition and consumer law?

You must understand the rules and follow the rules. Additional details can be found:

ACL – See our Small Business Answers guide here

ACCC

For more details on how these laws are admistrated see Fair trading – The Competition and Consumer Act of 2010 is a national law administered by ACCC nationally and state and territory regulators https://www.business.gov.au/products-and-services/fair-trading/fair-trading-laws

SUMMARY – protect you and your customers

Australian competition and consumer law is designed to protect both consumers and businesses from practices that misrepresent, disadvantage, deceive, or reduce competition.  The government has large departments to police the associated laws and you should ensure you and your staff are familiar with those laws that will affect your business.

The following guide published by the ACCC explains Australian competition and consumer law in more detail. https://www.accc.gov.au/publications/small-business-the-competition-and-consumer-act

Choosing a business structure

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Right at the beginning of your Small Business journey, you need to decide which business structure is best for your situation. This will have an impact on the complexity of running it as well as taxation and personal liability implications. This guide will explain your options to help you decide which is best for you.

A business structure is the legal structure in which you set up your business

WHY does a business structure matter?

The practical impacts of this decision can affect how much tax you pay, legal implications like licensing and personal liability, and the control and procedures you have in running your business.
You cannot run a business unless it fits into a business structure.

WHAT are my business structure choices?

The four most common types are:

  • Sole Trader – one owner full control
  • Partnership – 2 or more owners split income and liability
  • Company – a legal entity where liability may be limited
  • Trust – a person manages assets for the benefit of others

HOW do I decide sole trader, partnership, company or trust?

This can be a very complicated decision therefore seeking advice from an accountant, lawyer or business advisor could be a worthwhile investment.  The good news is that if you change your mind or circumstances change, you can change your business structure at some point in the future. 

Sole Trader

This is the simplest form of setting up a business and requires the least amount of paperwork but the most risk to your personal assets. If things go wrong, you could lose your house.  On a more positive note, you make all the decisions and all the reporting is rolled into your personal tax return. 

You will have to keep all records, like receipts, for 5 years and all profits and losses fall back to you and cannot be split. If you hire employees, you are still bound by any government legislation obligations like superannuation contributions and workers’ compensation.

Partnership

There are 3 types of partnership structures you can consider:

General partnership – all partners are equally responsible for managing the business, and each has unlimited liability for the debts and obligations the partnership incurs.

Limited partnership – is a great tool for partners who want to invest in a business but not be involved in the day to day.  Here liability is limited to the amount of money they have contributed to the partnership.

Incorporated Limited Partnership – Put simply one partner has unlimited liability the rest of the partners have limited liability.

Each state has slightly different laws for partnerships and details can be found here:

A partnership must have an ABN and each partner requires a tax file number.  Each partner will be responsible for the tax implications on their share of the business and must take responsibility for their superannuation.  If a partnership earns more than $75,000 they must register for GST.

Company

A company is the most expensive option to set up and run. It is a legal entity and as such can borrow money, take legal action, and be sued by someone else.  As a shareholder of a company whether it be 10% or 100% you are only liable for any unpaid money on your shares.  So in theory they cannot come after your house, however as a director of that company, if you are found to be in breach of your legal obligations, you could be sued. A company is owned by its shareholders but controlled by its directors. More information on this can be found https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/ . All money a business makes is owned by the business and an annual tax return must be completed in its name.
You must register for the Goods and Services Tax (GST) if revenue exceeds $75,000.  The Australian Securities and Investment Commission requires companies to keep records for 7 years.  Directors also have an annual obligation to show a business is solvent which means you can pay your debts and have the cash to run your business.

Trust

This is an expensive way to run a business but might have certain tax benefits.  A formal trust deed must be established that sets out how the trust operates and also comes with annual formal administration tasks.

According to the Australian Tax Office:

Trusts are widely used for investment and business purposes.

A trust is an obligation imposed on a person or other entity to hold a property for the benefit of beneficiaries. While in legal terms a trust is a relationship, not a legal entity, trusts are treated as taxpayer entities for the purposes of tax administration.

The trustee is responsible for managing the trust’s tax affairs, including registering the trust in the tax system, lodging trust tax returns, and paying some tax liabilities.

Beneficiaries (except some minors and non-residents) include their share of the trust’s net income as income in their own tax returns. There are special rules for some types of trust including family trusts, deceased estates, and super funds.

The Australian government also provides a handy tool to help you decide. https://register.business.gov.au/helpmedecide

HINT

This handy guide can help you make your decision. Be sure to select I am not sure. https://register.business.gov.au/helpmedecide

SUMMARY – Research Business Structure

If unsure get some professional help deciding and possibly assisting you to set up your business structure.  It comes down to how many owners there will be and how you divide profits and liabilities.  For those of you worried about losing your house, this can be protected by insurance as discussed in a separate essential guide on Business Insurance.