Becoming a sole trader is a very simple way of starting a business in Australia. Sole traders can be anything from freelance writers, to trade workers, to consultants — they are essentially an individual who solely works for themselves and is legally responsible for their business. If you’re considering becoming a sole trader, there are many ways you can prepare yourself, from enrolling in a grad cert in business online, to undertaking an apprenticeship, or simply engaging with industry experts for advice — the best education or preparation for you will depend on your individual circumstances.
The Benefits of Being a Sole Trader
A sole trader is an entrepreneur who works as their own boss and runs and operates a business entirely on their own. You are legally liable for every facet of your firm, including debts and losses, as a lone proprietor. Being a solo proprietor has numerous advantages; here are just a few of them. Being a sole trader comes with a lot of responsibilities and potential obstacles as:
Complete Control
Working for yourself means you have complete control over how you do things — whether that be your schedule, creative choices, or the rates you charge. You get to decide exactly how you and your business work.
The Profits Are Yours
If you’re the only one in the business, then you get to decide what to do with your profits. Essentially, the money is yours to take home at the end of the day. Just don’t forget to consider things like tax and superannuation, though.
Flexibility
Being your own boss means you don’t have to ask management for time off, an early finish or longer lunch break when you need it. You can just go right ahead trusting that you know what you’re doing.
Applying to Be a Sole Trader
The application process is relatively simple, here are some important steps and considerations:
Get an Australian Business Number (ABN)
Applying for an ABN is the first step. It’s a free process that allows you to set up your business.
Put simply, an ABN is a unique 11-digit numerical code for any single entity that is registered at the Australian Business Register,
If your business has a GST turnover of 75k or more, then you also must register for GST.
Application Checklist
To complete your ABN application, you’ll need:
- Your Special Personal Tax Token File Number (TFN)
- Tax or BAS agents registered agent number, if you are using one
- Your previously held ABN, if applicable
- The date you need your ABN to be effective from
- Legal entity name — typically a sole trader uses their own name
- Authorised contacts: list any contacts, like a tax or BAS agent, authorised to make updates on your behalf
- Business contact details including address, postal address, email, and phone number
- Business description — what does your business do?
- Business location: the physical location that your business runs out of
Fill out all your details, and if everything looks right, you should receive your ABN almost immediately.
Sole Trader Taxes and Obligations
Managing all aspects of your business includes things like tax. When money starts coming in, you’ll have to put some away for things like:
- Income tax
- Medicare levy
- GST, when and if your business starts making over $75k
- Student loan repayments such as HECS, if applicable
- Superannuation contributions
For an estimate of how much to set aside, check out a tax calculator or consult with an accountant or financial advisor.
In Australia, becoming a sole trader is a relatively simple and stress-free process. By understanding the responsibilities of a sole trader and abiding by legal requirements, you can set yourself up for success while running your business. Whether you’re in the creative, trade, or any other industry, just starting out, making a career switch or looking for a side hustle, being a sole trader comes with a range of benefits. Working for yourself allows for increased decision making, flexibility and control over profits.
If starting your own company is something you’re interested in, sole trading is the common business framework and a fantastic place to start.
