The A (Address) record is used to point your domain at an IP address (IPv4) of the computer hosting the domain.. To set it up, you will need an IP address from your hosting provider.
An ABN (Australian Business Number) is a unique 11 digit number issued by the ATO to all eligible entities. You must have an ACN before you can apply for an ABN. A company’s ABN consists of their ACN with a 2 digit prefix. The ABN system works together with the GST and PAYG withholding system.
As a general rule of thumb, your ACN identifies your company, and an ABN identifies your company to other businesses and various government agencies (such as the ATO).
An Australian Company Number (usually shortened to ACN) is a unique nine-digit number issued by the Australian Securities and Investments Commission (ASIC) to every company registered under the Commonwealth Corporations Act 2001 as an identifier.
Agricultural property is broadly defined as real property that is designated or permitted to undertake agricultural activity. Common examples of agricultural activity include the raising, harvesting of crops and breeding/managing livestock.
A change to one of the terms of a contract.
A document interface that allows software applications to interact with other applications.
ASIC is Australia’s corporate, markets and financial services regulator, ensuring that Australia’s financial markets are fair, transparent and supported by confident and well-informed investors and consumers.
Otherwise known as the corporate watchdog. They are the custodians of information and maintain a number of business and company registers.
An asset is anything of economic value owned by your business that is expected to be able to meet future debts and obligations. Another way you can ask yourself whether something is an asset is to ask yourself whether it is able to generate cash flow, reduce expenses or improve sales.
Average inventory calculates the median value or number of goods within a specific time frame. The basic formula for this is:
Average Inventory = (Current Inventory+ Previous Inventory) / 2
The state of being bankrupt, i.e. your business is unable to repay debts, and cannot come to suitable repayment arrangements with its creditors.
Tax reporting requirement for businesses. Used for reporting and paying goods and services tax (GST), pay as you go (PAYG) instalments and withholding tax. Due on a monthly, quarterly, or annual basis (depending on your business structure and requirements).
A discussion or document that outlines your client’s or customer’s expectations, vision, needs, objectives and requirements for a product or project.
Burn rate is simply the rate at which a company uses up its cash – it can be thought of as a measure of negative cash flow. Most commonly used in the context of startups, this would mean the rate at which the startup is spending its venture capital to finance overhead and development costs before being able to generate income from trading goods or services. The burn rate is usually quoted in terms of cash spent per month.
As startups are not generating positive cash flow in the early stage of its operations, staying on top of the rate of cash flowing out as well as the level of its cash reserves in the bank are particularly important.
An item offset as an expense against your taxable income, i.e. the purchase of a business-related product or service that is used to help you generate income.
A general business license, similar to a use tax, assessed annually for the privilege of operating a business in the jurisdiction. A special license is issued to a business that will provide products or services that require regulation (e.g., doctors, lawyers, barbers, etc.) Licences and permits are issued by local, state and federal government departments, as well as other organisations (training centres).
A business name is simply the name under which you want to conduct your business or want your customers to identify the business with. You must register a business name in Australia, unless you trade under your own name, or fall within an exemption. For example, if you trade solely in the Cocos (Keeling) Islands. Registration on the Business Names Register identifies who is behind a business name.
Capital refers to durable financial assets that generate income through investment. It can be thought of as a long term investment to provide the business with future cash flow. Common examples include property, buildings, equipment, machinery, patents, software and cash reserves.
A key concept to note is that as an alternative to generating an expense or acquiring a short term asset, the investment of capital provides the business with long term economic value. This is important for long term planning and protecting against future fluctuations.
A company is a more complex legal entity whose existence is separate from its owners and managers. Possessing a legal status, a company has rights similar to that of a living person meaning that it can incur debt, sue and be sued.
A company name is the title under which it is registered with ASIC as a separate legal entity. Under the Corporations act, it must contain the legal terms/abbreviations ‘Pty Ltd’ or ‘Ltd’.
Stored at either your registered office or principal place of business, your company register is actually a collection (or folder) a group of documents that must be kept in order to comply with the Corporations Act (2001). These smaller registers contain of all the financial records, statutory papers and files that are required to ensure ongoing compliance with ASIC and provide up-to-date information on the ABR. Your company register is important because it provides a snapshot of your business at any moment in time.
The company secretary is appointed by the directors to take on the responsibilities of compliance, legal obligations and administrative tasks of the board and the company. Specifically, some of the main duties include:
A company secretary does not automatically become an employee, and is not necessarily a director either.
Also given the name “Corporate Tax”, this is the tax placed on the profit of a firm. A general calculation of this tax is as follows:
Company Tax = (Revenue – Cost of Goods Sold (COGS) – depreciation) * (1- tax rate)
In Australia, the company tax rate is 28.5% for “Small Business Entities” and 30% for all other businesses.
The process of ensure your business complies with or satisfies regulatory requirements.
The cost of goods sold plus any expenses incurred in the selling and delivery of the product or service.
In simple terms, a creditor is an entity that you owe money to. These would generally be suppliers or lenders who have provided you with a service or cash, for which you will need to compensate them for in the future.
Current assets represent cash, cash equivalents or any other financial asset that can be reasonably be expected to be converted to cash within the next 12 months. Common examples include petty cash, accounts receivable, inventory and prepaid expenses.
This is a measure of a business’ customer rate of growth. As a general rule a business should be showing at least some growth in their customer base (industry, company life cycle and economic climate permitting).
If the company is not seeing little to no growth in their customer base especially in the beginning stages of a business or at an industry with a healthy growth rate this is extremely worrying and the business should investigate why this is the case.
A debtor is simply anyone who owes money to you. This is either a person or business that you allow to purchase a good or service with an agreement to pay you back at a later date. Also referred to as ‘Accounts Receivable’ in the financial statements.
A failure to pay a loan or any other debt obligation.
The expense or reduction due to the gradual usage or “wear-out” of a fixed asset.
Directors are responsible for the management of a company’s business activities.
Some of a director’s duties include:
A dividend is the distribution of some of the company’s profit to its shareholders. Dividends are not mandatory and it is under the discretion of the board of directors as to whether or not they are paid out, and if so, the amount of dividend to be paid out.
Dividends can be distributed in the form of cash, shares, or other asset.
Startups and high-growth companies rarely offer dividends because all of their profits are reinvested back into the company to sustain its growth. Larger, well-established companies tend to issue regular dividends as they try to maximise their shareholder value.
DNS cache. This a temporary database, maintained by a computer’s operating system, that contains records of all recent visits and attempted visits to Web sites and other Internet domains.
The main web address/website for your business. It’s good practice to renew ownership of your domain for several years rather than just the minimum period. Search engine rankings favour websites with longer registrations because it shows commitment.
Domain Name Servers or DNS are the Internet’s equivalent of a phone book, translating domain names into Internet Protocol (IP) addresses. It is much easier for us to remember a word than a series of numbers. The same is true for email addresses.
Personal expenses paid for from a business account.
This is the projected value of your net sales that you made, or are likely to make in the next 12 months
An expense is defined as the economic costs incurred by a business in order to generate revenue.
A family partnership is a partnership where two or more members are related to each other. An other partnership covers all partnerships that are not limited partnerships or family partnerships.
Tax payable on benefit ‘payments’ to an employee, incl. privileges and services like a gym membership, entertainment, or a work car being used for private purposes.
A subjective measure of how well your business can use its assts and generate revenue. The overall results of business operations in monetary terms.
Formal documents representing a business’ transactions and financial standing. The main documents are:
A financial year is a business’ financial reporting period and can run over any 12 month period of its own choosing. The standard Australian Financial Year runs from 30/6 to 31/7 the following year.
A fixed cost is one that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs therefore have to be paid by the company, regardless of any extra business activity. Examples of fixed costs include the lease, electricity or water bills expenses. The total costs of a business are made up of fixed costs + variable costs.
Fringe benefits tax (FBT) is a tax emplyers pay on certain benefits they provide to their employees, including the employee’s family or other associates. The benefit may be in addition to, or part of, their salary or wages package (taken from ATO website). THE FBT year runs from 1 April to 31 March (different from the June financial year).
Some examples of FBT include:
Gross profit is a business’ total revenue minus cost of goods sold. This does not account for indirect expenses incurred such as overhead or salary expenses.
Gross profit = revenue – cost of goods sold
Gross profit is a company’s total revenue (equivalent to total sales) less the cost of goods sold. It is a “top line” measure of the essential aspects of the company’s sale of goods or services – since it shows the total revenue minus the costs involved in transferring those goods or services to the customers.
Goods and Services Tax (GST) is an overarching tax of 10% on most goods and services sold or consumed in Australia.
A holding company itself can be either a company or partnership, and owns enough voting rights in another company to control its management and governance. A holding company exists for the sole purpose of controlling and managing another company or partnership, rather than to produce its own goods or services. Holding companies may also be set up for the purpose of owning property such as real estate, patents, trademarks, stocks and other assets. When a business is 100% owned by a holding company, it is called a “wholly owned subsidiary”.
A contract in which you or your business receives financial protection or reimbursement against losses from an insurance company
A professional who sells, solicits or negotiates insurance. As specialists in risk management, insurance brokers act on behalf of their clients and provide advice in the interests of their clients.
An amount paid periodically to the insurer by the insured for covering their risk.
Conceptual property that is the result of creativity (e.g. patents, copyrights)
Interest is simply the amount charged to someone for borrowing money. So to a borrower the interest is the cost of borrowing the money, and to the lender the interest is income gained from lending the money out. Interest is expressed as a percentage rate.
There are two main types of interest; simple and compound. Simple interest is charged on the initial principal lent out to the borrower. Compound interest is interest on both the principal and the compounding interest that is paid every period.
The ATO has provided guidance on what it considers an investment body. Investment bodies can include:
A person who invests money or resources into your business with the expectation of financial or other benefit.
A commercial document itemising a transaction between a buyer and a seller.
An invoice usually includes the quantity and price of goods/services, GST amount, ABN, the date, an invoice number, and the issuing company’s and purchaser’s details.
An online unique identifier. Every computer has its own IP address on the Internet, a unique string of four numbers separated by periods, such as 126.96.36.199. Trying to remember the IP addresses of all of your favourite websites would be nearly impossible, so a group of computer scientists created the domain name system to assign a unique name to each numeric IP address.
A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organisation. KPIs differ per organisation; business KPIs may be net revenue or a customer loyalty metric, while government might consider unemployment rates.
Tax payable on cars with a GST-inlcusive value above $63,184 (2015-16 threshold). Applicable to businesses who sell or import luxury cars..
A liability is a business’ debt or obligations incurred during the course of operations. They represent a future loss of economic value. Examples include accounts payable, mortgages and loans.
Limited liability means that shareholders have their liability limited only to the extent to which they have invested in the partnership or company. Limited liability ensures that shareholders do not have to personally pay or have their personal assets seized should the partnership or company become liable for huge amounts of debt or penalties.
Limited liability in a partnership is given to limited partners (as opposed to general partners) and to shareholders in a limited liability company.
To wind up or sell your business, especially to pay off debts.
Luxury car tax (LCT) is a tax on cars with a GST-inclusive value above the LCT threshold.
LCT is imposed at the rate of 33% on the amount above the luxury car threshold.
LCT is paid by businesses that sell or import luxury cars (dealers), and also by individuals who import luxury cars.
(Taken from ATO website)
Minutes are the notes taken as an instant record of a meeting or hearing. It is important for businesses to record minutes so that there is physical proof of decisions made during meetings. Minutes may be taken during meetings of directors, shareholders or public officers.
Minutes generally consist of the details, attendees, statement of issues to be discussed and resolutions made.
MX record: MX stands for Mail eXchange. MX Records tell email delivery agents where they should deliver your email.
Name Server: A nameserver maintains a directory of domain names that match certain IP addresses. In other words, it’s where the DNS server records for your domain are stored, allowing you to decide which hosting providers controls your website and email.
NPS is a management tool that can be used to gauge the loyalty of a form’s customer relationships.
The Net Promoter Score is calculated based on responses to a single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?” Scores are commonly taken on a scale from 1 – 10.
Promoters are respondents who score between 9 – 10 are considered likely to exhibit value-creating behaviours.
Passives score between 7 – 8.
Detractors score between 0 – 6 and are believed to be less likely to exhibit value-creating behaviours.
Finally, the Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. Passives do not directly affect the overall net score.
A not-for-profit (NFP) organisation does not operate for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up.
An NFP organisation is not an organisation that hasn’t made a profit. An NFP organisation can still make a profit, but this profit must be used to carry out its purposes and must not be distributed to owners, members or other private people.
We accept an organisation as NFP where its constituent or governing documents prevent it from distributing profits or assets for the benefit of particular people – both while it is operating and when it winds up. These documents should contain clauses that are acceptable to us as showing the organisation’s NFP character.
Officeholders are defined by ASIC to be the directors and secretaries that have certain responsibilities under the Corporations Act (2001). Some of the general obligations can be summarised in the following:
Other additional officeholder responsibilities include:
Keeping company and financial records that could include:
Keeping ASIC informed
ASIC must be informed within 28 days if your company’s details change, such as:
Shares represent ownership in a company and gives the owner (shareholder) rights to:
Ordinary shares are also referred to as common stock.
A partnership involves two or more people going into business together. Unlike a company, a partnership is not a separate legal entity. Each partner jointly owns all the business’ assets and liabilities.
Partnerships are classified as either general or limited. A general partnership involves each partner being equally responsible for the management of the business, and each has unlimited liability for debts and obligations. A limited partnership must have at least 1 general partner and at least 1 limited partner. General partners are responsible for the day-to-day running of the limited partnership and their debt is unlimited. Limited partners do not take part in the management of the limited partnership and has his/her liability limited to the amount contributed to the partnership.
Under the Pay as you go (PAYG) withholding rules, you have an obligation to collect tax from payments you make to employees and some businesses so they can meet their end-of-year tax liabilities.
You’ll have withholding obligations if any of the following apply:
As an employer, you have other legal obligations, aside from tax and super. You must only employ legal workers – that is, Australian citizens, permanent residents and non-citizens with Australian visas that allow them to work.
A legal document stipulating who will be responsible for managing your interests should you lose your legal capacity to make decisions.
A type of insurance policy that protects your company against the financial risk of being found liable for negligence.
A public officer is the representative and point of contact between the company and the ATO. These obligations fall under Section 252 of the INCOME TAX ASSESSMENT ACT 1936. The public officer is therefore responsible for the company complying with the legislation and are liable for penalties should the company violate these responsibilities.
A company has only one public officer and the requirements are as follows:
A public officer does not have to also be a director of the company, though they often are.
The process of keeping or recording information that explain certain business transactions. Record keeping is a requirement under tax law, however the extent of record keeping varies greatly depending on the entity type and special situations.
Registered tax agents are the only people allowed to charge a fee to prepare and lodge your tax returns. The tax agent number (TAN) may be found on an income tax return prepared by your tax agent. If you cannot find this number, please leave the field blank.
This is the person or entity who owns the rights to use a specific domain name. That’s you.
A registrar is the company you use to register your domain name. That’s us.
As one of the most core aspects of running a business, revenue is a measure of the amount of money coming into your business. Specifically, revenue is the total income from all sales of goods or services. This is calculated by multiplying the total number of goods or services by the price at which they’re sold.
You might see the terms “sales”, “income” or even “top-line” being used, these are equivalent to “revenue”. Revenue is usually made up of the income from “core” goods or services as well as additional “other” revenue such as interest, fees or commission for example.
A royalty payment is one made to an owner for the use of their property, most commonly patents, copyrighted works, franchises or natural resources. The use of the owner’s property is for the purpose of generating revenue or other desirable activities. Royalties are usually legally binding and made out to compensate the owner for the asset’s value.
Royalties are often expressed as a percentage of the revenues generated from the use of the property, but can be negotiated. As an example, Microsoft charges computer manufacturers royalties for the use of their Windows operating system on those computers.
A fixed, regular payment, typically paid on a monthly basis but often expressed as an annual sum. This payment is from business to employee.
The process of choosing targeted keyword phrases related to a site, and ensuring that the site places well when those keyword phrases are part of a Web search.
Someone who lends you money in exchange for you agreeing to use your business or specific assets as collateral. Commonly given out by banks to borrowers.
The page that you are sent to after you run a query in a search engine. It typically has 10 results on it but this can vary depending on the query and search engine in question.
A shareholder (or member) of a company collectively owns that company. Although they are not responsible for the management of the company, some matters are considered so fundamental that they require shareholder approval (through voting).
Some such examples include:
A Social Media Handle is simply a unique identifier or nickname for your business on social media. Common best practice is to ensure that it’s similar to your brand name and remains consistent across all social media platforms.
The act of driving traffic through social media channels to reach a certain goal.
The sole trader structure is the simplest form of business structure where there is no division between business and personal assets. Most sole traders opt to trade under their own name although you can choose to register a business name (see “Do I need to register a business name” in our FAQs for more info).
This structure is the least onerous in terms of reporting requirements and gives the owner the most control of their business. Losses incurred in business activities may be offset to other income earned (such as wages or on investments). The biggest downside to this business structure is unlimited liability. This means that even all your personal assets are liable to be used against business debts and obligations.
A legal practitioner who traditionally deals with most of your business legal matters. Solicitors usually meet with and advise their client, by do not litigate matters in court.
The actual goods or materials a business currently has on hand.
A regular process involving a physical count of merchandise and supplies actually held by a business, performed with the purpose of verifying stock records and accounts.
A regular amount paid on behalf of employees into a complying superanuation fund towards future retirement benefits, usually in accordance with specific taxation laws.
A person or business that is the source for goods or services.
A tax agent is a person who is in the business of professionally preparing the tax returns of individuals or businesses. Some basic requirements to become a tax agent are as follows (per the ATO):
A document giving the ATO information about your business’ reportable annual taxable income.
Top-level domain (TLD) refers to the last part of a domain name, which is the part that follows immediately after the last “dot”. Examples include .com, .net, .org etc
There are two common definitions for turnover.
1. The amount of revenue generated by the company in a particular financial period.
2. The rate at which employees leave and are replaced
In essence, a company is an Ultimate Holding Company (“UHC”) if it has a subsidiary which may or may not have further subsidiaries but it is itself NOT a subsidiary of any other company.
Churn, or attrition, is another really important metric you should keep your eye on. This is a measures the percentage of people who leave every month.
Customer or user attrition for a given period expressed as a percentage. Initially used for subscription businesses but now a popular metric for other internet based businesses such as eCommerce. In such cases, it’s important you define what constitutes a ‘churned’ customer.
If you have a high churn rate this is extremely worrying for your company, you have managed to convert the customers but for some reason have not been able to retain them. It is important to search for feedback in order to understand why they no longer user or want your service to fix this issue moving forward.
A variable cost is one which varies with the amount of goods or services produced. These costs are dependent on the business’ total production volume of goods or services. They rise or fall in proportion to the amount of goods or services produced. Examples of variable costs include direct material and labour costs. A business’ total costs comprise of variable + fixed costs.
If you make wine, import wine into Australia or sell it by wholesale, you’ll generally have to account for wine equalisation tax (WET).
WET is a tax of 29% of the wholesale value of wine. It is only payable if you are registered or required to be registered for GST.
It’s designed to be paid on the last wholesale sale of wine, which is usually between the wholesaler and retailer. But it may apply in other circumstances – such as cellar door sales or tastings – where there hasn’t been a wholesale sale. WET is also payable on imports of wine (whether or not you are registered for GST).
(Taken from ATO website)
A tax payable of 29% of the wholesale value of wine. Applicable to businesses who make, import or sell wine wholesale.
Designed to be paid on the last wholesale of wine, which is usually between wholesaler and retailer