Setting up a community renewable energy group requires a considerable amount of planning. To start with, you have to create a legal entity such as an incorporated association, a cooperative, a public company, a trust or some other corporate structure, which comes with a range of legal and financial responsibilities.
Main topics covered in this article include:
1. Business and tax registration
In most cases, you need to register the name of your business as a legal entity. There are different rules for different business structures. For example, you register cooperatives with individual states, whereas you register companies with the Australian Securities and Investments Commission. Refer to the Government business website portal in your state for registration details that apply to you.
Goods and services tax (GST)
If your business has a turnover of $75,000 or more ($150,000 or more for a non-profit organisation), you need to register for GST. For more information, go to the Australian Taxation Office (ATO) or the Australian Business Register. You must pay one 11th of all taxable sales to the ATO, but you can claim credits for the GST you pay when making business purchases.
Australian business number (ABN)
You don’t have to have an ABN, but it helps you register for GST and other business tax obligations. If you choose not to have an ABN, other businesses can withhold 46.5% (the top marginal tax rate) of payments to you. Go to the Australian Business Register for more information.
Tax file number
If you operate as a company, partnership or trust, you need a business tax file number. You can go to the Australian Business Register and apply online.
Payroll tax is a state tax calculated on wages paid by an employer to its employees. You only pay this if your monthly payroll exceeds $48,333 or your annual payroll exceeds $550,000. The amount you pay differs from state to state, so contact your local revenue office for more information.
Pay as you go (PAYG) withholding
If you pay employees or directors, you need to register for PAYG withholding and send the amounts you 'withhold' to the ATO. You must also withhold an amount from payments you make to other businesses if they don’t quote their ABN to you. Visit the Australian Taxation Office for more information.
While you must do all you can to minimise risk, you need appropriate insurance to cover the people who are part of your organisation for any potential liability, injury or loss. You should also protect equipment, materials and property.
Below are some of the main types of insurance to consider when forming a community renewable energy scheme. Remember, it’s worth discussing your particular insurance needs with an insurer or broker and getting several quotes. Visit Our Community for more information.
Public liability insurance
You need public liability insurance to protect yourself against negligence claims made by a third party in respect of bodily injury or property damage. For example, it will probably cover you if someone enters your premises, slips due to a wet surface and sustains a serious head injury. The cost of this type of insurance has increased substantially in recent times.
Directors’ and officers’ liability insurance
While incorporation of an association provides some limited liability for members, it may not protect the organisation or individual directors in cases where negligence can be proven. For example, a board member may negligently give wrong advice, ask someone to perform a dangerous task or dismiss staff without proper authority or process. Where such cases can be proven, if you don't have the relevant insurance in place, the personal assets of the negligent board or committee members can be seized to meet any damages.
This is similar to normal household property insurance and covers contents held within a property owned or occupied by an organisation. It also covers you against fire, storm, accidental damage or theft. You can reduce the cost of this type of insurance by protecting your property. For example, with deadlocks, alarm systems, security lighting and signage advising the property is patrolled for security.
Building insurance covers your physical premises against events such as fire, storm or vandalism. If you don't own the facility, you may not need this insurance, but check your lease or hire agreement.
Personal accident insurance
Personal accident insurance (sometimes known as volunteer insurance) covers members and volunteers for any expenses resulting from accidental injury, disability or death while working on behalf of the organisation. This type of insurance would cover loss of income if the injured party were unable to work through sickness or injury.
If you have paid employees, this is compulsory. It covers expenses such as wages and medical bills if a person is injured at work. You must meet your obligations under occupational health and safety legislation.
3. Financial systems
It's important to have good bookkeeping systems. Being fully aware of your financial situation will help you to manage your business more effectively.
Effective bookkeeping systems should help you:
- meet your financial obligations. This includes paying your taxes and bills, and collecting money from customers
- keep track of financial trends - to help you plan for the future
- present your business accounts to lenders and financial institutions
- and your accountant keep on top of things.
The flow of money in a business is known as transactions. All these transactions need to be documented and recorded. This record - of money coming in and going out - is bookkeeping.
Keeping documents, such as invoices, is an important part of your record keeping as it proves the figures in your bookkeeping. Accounting is when you analyse the books to check you're on the right track and help you find ways to improve your business.
There are State, Territory and Federal Government websites with useful information on topics such as financial management and bookkeeping.
4. Employing people
You take on a variety of responsibilities when you start to employ people, so you need to have certain systems in place.
You need a good payroll system to ensure your employees are paid accurately and on time. Some companies buy software (such as MYOB) to process their payroll through a computerised system. You can avoid this expense by using a manual payroll system. However, you need meticulous systems set up for this to function properly.
To set up a payroll system, you need:
- a time sheet process (manual or web-based)
- an automated payment process
- a superannuation payment process
- employee information, including tax file number declarations.
You need HR policies to cover a broad range of issues, such as:
- recruitment and appointment
- induction, probation, confirmation and termination
- performance management, development and training
- employee relations
- absences and leave
- equity, equal employment opportunity and conduct.
For more information, visit Our Community.
A written employment contract outlines the rights, obligations and conditions of employment. While there is no mandatory requirement for this, it's considered good practice.
All community groups should aim to get the best value from their banking products. Many community groups are unaware of the fees and charges on transaction accounts. Go to Our Community for more information.
Visit your local branch to discuss fees, charges and different accounts. They should then recommend the most suitable account for you.
Below are some fees and charges you should be aware of.
Monthly account fee
The bank will charge you a monthly fee to pay for 'account keeping'. Always look for accounts with low fees.
ATM transactions and enquiries
Not many community groups use ATMs for transactions and enquiries. If you do, you may benefit from lower fees than 'over the counter' transactions, where you may be charged for any enquiry.
'Over the counter' transactions
'Over the counter transactions' tend to be more expensive, so this is one area where you should try to save money. Look for ways to reduce these type of transactions. For example, ask people to pay you using a direct deposit into your account or electronic transfer.
If deposits are made to your account via other banks (a bank not holding your account) they will incur even higher fees than deposits made at your own bank. You should definitely try to avoid these and make every effort to use your own bank to transact.
Doing your transaction electronically can save you a lot of money in fees. Phone banking is a good example - it's very cheap and easy to use.
Electronic Funds Transfer Point of Sale
Electronic Funds Transfer Point of Sale (EFTPS) is an acronym that means you can transact there and then.
You can use online banking to access your account details and make payments any time. This can be a quick, cheap and efficient way to do things.
Direct debit or credit
Using direct debits can save you time and money. It's where payments or deposits are made directly into or out of your account.
Telephone banking has changed the way we pay bills. Many people use it to pay everyday household bills and it's one area where community groups can save money. Phone banking is quick and easy to use.
Business in Sydney and NSW
Business Development Queensland
Business South Australia
Business Link Western Australia
Department of Business and Employment NT
Business and Industry Development ACT
My Business Resource Centre