What is an ABN?
An ABN, or Australian Business Number, is a number provided by the Australian Busines Register (ABR) to all businesses when they register with the ABR. Businesses are determined as a business when enterprise activities are carried out with the intention to make a profit and are repeated. A simplified example is if you provide event makeup services to clients every other weekend.
Do you need an ABN as a makeup artist?
The Australian Business Register defines the threshold between a business and a hobby is when you carry out activities with the intention to make a profit on an ongoing basis. For most makeup artists, this is after they have studied a professional makeup artistry makeup course and are wanting to start making money providing makeup services. Fortunately, it is quick and easy to register for a free ABN with the ABR, don’t get ripped off by websites claiming to register an ABN for you for $50.
If you are planning to work for a company as a retail makeup artist for a store such as MECCA or Sephora, you will not need to register for an ABN since you are working as an employee for a company
Types of Business Registrations
There are a few different types of business registrations available in Australia
Sole Trader
A sole trader registration is the most common business registration for people that provide freelance or contracted services, a sole trader means that you are the owner/operator of the business. Whilst you can have employees as a sole trader, businesses registered as sole traders typically have no employees.
As a sole trader, you will have full control of running your business. This structure is usually relatively easy and cheap to set up. It also has minimal legal requirements to set up; all you need to do is register an ABN with the ATO
Any profits of the business become your personal income (you pay tax as any other individual). But, you will get to keep any after-tax profits of the business.
As a sole trader, you’ll be personally responsible for any risks or losses of your business, meaning that your personal assets will be at risk if there is any debt or liability of the business.
Partnership
A partnership is when two or more parties work together and have a share in the business, one of the main issues with a partnership is that all parties are equally liable for all actions taken by the other parties. A simple example of this is if you and a friend start up a makeup business and your friend takes out a loan under the business partnership, you are also jointly responsible for paying back the loan, even if you or your friend leave the partnership.
This is why it is important to be careful before going into business with a partner and to seek legal advice from a lawyer so that necessary contracts between partners are created
Company
Company registration is most popular for businesses that hire and pay wages for multiple employees, you may want to consider a company business structure if you are planning to open up a salon or retail beauty business. Registering a company comes with a few main advantages.
Companies are required to only pay 30% tax on all income (You will also need to register for GST if your company expects to generate over $75,000 in revenue within a financial year). This can lower the overall amount you pay in taxes, compared to a sole trader if your company generates a significant amount of profit every year.
Companies also provide protection against liabilities that sole trader registration does not. It is important to note that the registration and ongoing costs of a business are significantly more than that of a sole trader.
What type of business registration is best for a Makeup Artist?
A sole trader business is the business registration type best suited to most makeup artists that provide freelance makeup services (provides makeup services to clients on a regular basis)
Do I need to register for GST?
Goods and services tax (GST) is something that you have likely noticed on receipts and invoices for purchases you have made. GST is a 10% tax that is included in the price of a product or service; in some cases, GST is charged on top of the quoted price. Businesses then need to declare pay 10% GST every month to the ATO. All businesses, regardless of the business structure, need to pay GST if they expect to generate over $75,000 in revenue within a given financial year
The good news is that unless you expect to make $75,000 within a given financial year, you do not need to worry about GST registration or charging GST on top of your fees.