Common Mistakes When Starting a Business in Australia
Mistakes aren’t something only beginners make
Many people have real business experience — from their home country, or within their local community in Australia. But Australia’s legal, tax, and employment environment differs enough that old experience doesn’t automatically carry over. The list below covers what happens most often — not to judge, but to help you prepare.
Mixing personal and business money
This is the most common mistake and the one that causes the most knock-on problems.
When business money and personal money share one account, you don’t really know whether the business is making a profit or a loss. Your accountant spends more hours separating it out. When the ATO reviews your affairs, you have to explain each transaction. And for a company, mixing money this way can be seen as a director using company assets for personal purposes — a serious legal problem.
The simple solution: open a separate bank account for the business from day one. See the related guide on why you should keep personal and business money separate.
Choosing the wrong business structure
Many people choose sole trader because it is the simplest and cheapest way to start — and that isn’t always the wrong choice. But if the business carries significant legal risk (for example, services, construction, food), or has several people investing together, or you have personal assets you want to protect — then a sole trader structure has no mechanism to protect personal assets.
Changing structure after you have started trading costs money and time. It is better to decide correctly from the start, after consulting an accountant. See the related guide on choosing a business structure in Australia to understand your options.
Not understanding tax obligations from the start
“I’ll deal with tax later” — this line leads to fines, accumulated tax debt, and stress you don’t need.
From the very beginning, you need to understand: is your business eligible to register for GST and when do you need to register? What is the BAS and when do you lodge it? How is your business income taxed, depending on your structure?
You don’t need to do it all yourself — but you need to understand enough to know whether you’re using your accountant correctly and to avoid surprises at the end of the financial year. See the related guide on tax and accounting for small business owners in Australia.
Hiring employees without understanding employer obligations
Australia has fairly strict employment rules. When you hire an employee — including part-time or casual — you have obligations covering:
- The minimum wage under an award or enterprise agreement
- Paying superannuation on time for eligible employees
- Workers compensation insurance
- Single Touch Payroll (STP) reporting to the ATO
- A lawful process for ending employment
Not complying isn’t a “small mistake” — the Fair Work Ombudsman has the power to investigate and impose penalties. Wage breaches within the community have previously been reported in the media and caused major reputational damage.
Signing a premises lease without reading it carefully
A commercial lease is one of the longest-term and hardest-to-escape financial obligations when you open a business with a physical premises. Many people sign without reading carefully because they trust the landlord or feel awkward asking questions.
Things that are often overlooked: fitout and make-good obligations, who pays for repairs, the conditions for ending the lease early, and whether there is an option to renew and on what terms. See the related guide on what tenants need to watch for in a commercial lease in Australia.
Always have a solicitor read the lease before you sign — not after.
Underestimating consumer law
The Australian Consumer Law (ACL) protects consumers under rules you cannot opt out of through contract terms. If your product or service isn’t of “acceptable quality” or doesn’t match its description, the customer has the right to a replacement or refund — no matter what your contract says.
Many business owners don’t know this and think their “no refund” policy is valid. In reality, it isn’t.
Not preparing for the tough periods
Business isn’t always smooth sailing. Common mistakes during difficult periods:
- Continuing to trade when you know you can’t pay your debts (insolvent trading) — this is a serious legal risk, especially for a company director
- Not paying superannuation on time in order to hold onto cash — the ATO has a separate penalty mechanism for this
- Trying to resolve things alone without asking a professional when the situation becomes complex
If the business runs into trouble, talking to your accountant and solicitor early — as covered in the related guide on when a business owner needs an accountant, lawyer or migration adviser — usually gives you more options than waiting until you have none left.
Not investing in professional advice from the start
Many people try to do everything themselves to save money — and often pay more later when they have to fix mistakes. The cost of accountant and solicitor advice to start correctly is usually small compared with the cost of putting things right after they have gone wrong.
The related guide on starting a business in Australia includes a list of the decisions to prepare before you register.