On this page
- What a sole trader is
- Key factors for choosing this structure
- Register as a sole trader
Sole trader explained
A sole trader is a simple business structure and gives the owner all the decision making power. They can also hire people if they want to.
If you are unsure about what's right for your business, our step by step guide can give you a simple & quick assessment of which structure is more suitable for your business. You can change your business structure to suit your circumstances, when the business grows, or changes direction.
Key factors to consider
You don't have to register your business name if you use your own personal name. For more details and examples read more in Register a business name.
Registering your business name does not give your ownership or legal protection of that name. Trade marking will legally protect your name and stops others from trading with it - read more in Protect your business name or idea.
Tax File Number (TFN)
A key feature of a sole trader business structure is that you can use your individual Tax File Number (TFN) when lodging your income tax return.
Australian Business Number (ABN)
An ABN is needed if you want to avoid having amounts withheld from payments to you (your business clients must withhold 46.5% of any payments they make to you if you don't quote an ABN).
An ABN is compulsory if your business collects GST. When you apply for an ABN with the Australian Business Register (ABR), you will be asked to indicate if you want to register under the sole trader business structure.
Sole traders who are working as an employee or in connection with earning payment as a company director, office holder or under a labour hire arrangement, are not entitled to an ABN.
Goods and Services Tax (GST)
You need to register for GST if your expected or current annual turnover is $75,000 or over.
As a sole trader, you are responsible for your own superannuation arrangements. You may also be able to claim a deduction for any personal super contributions you make. Before you can claim a deduction, you have to notify the fund of your intention to claim the amount as a deduction and wait until the fund confirms that you can claim the amount as a deduction. Once you receive this confirmation, you can claim the super as a personal deduction on your tax return.
If you employ people, you will have responsibilities, including employee payroll tax and PAYG (including reporting and paying tax on fringe benefits) and superannuation payments for any eligible employees.
A sole trader owns all the business assets and is responsible for the liabilities of the business. Liability is unlimited and includes all personal assets, including any assets the owner shares with another person (such as a jointly-owned home or money in a joint bank account).
Find the right insurance to protect your business from trade interruptions.
Register as a sole trader
Once you have looked at the pros and cons, to register as a sole trader you will have to:
- decide whether you want to register a business name - this is only needed if you are using a name other than your personal name
- check your proposed business name doesn't infringe on existing trademarks - use TM Check to find out
- register your business name
- apply for the relevant licences and registrations for your business type e.g. tax file number or ABN
- find the right insurance for your business
Case Study: Working full time as a musician
Jonty Smith, musician
'You are your own boss, you can pretty much choose your own work times, all money earned goes straight into your pocket. Although there is the constant responsibility of maintaining a constant stream of work (and income), the satisfaction you get when things are going well is priceless.'
Read more about working fulltime as a musician