INTRO
If you’re thinking about starting a business in Australia, the simplest way to do it is as a sole trader. But simple doesn’t mean risk-free.
WHAT IS A SOLE TRADER?
A sole trader is a person who runs a business by themselves and is legally responsible for all aspects of that business. That means the profits are yours but so are the debts, the liabilities, and the risks.
You and the business are essentially one and the same in the eyes of the law. There’s no separation between your personal finances and your business finances.
This is the most popular structure in Australia used by freelancers, tradies, consultants, photographers, and thousands of small business owners every single day.
Setting up as a sole trader is actually very straightforward. Here’s what you need:
Step 1: Get an ABN that’s your Australian Business Number. You can apply for free at abr.gov.au and it usually takes less than 15 minutes.
Step 2: Register a business name if you’re trading under a name that isn’t your own. For example, if your name is Sarah Chen but your business is called ‘Sydney Cleaning Co you’ll need to register that name with ASIC.
Step 3: Register for GST if you expect to earn $75,000 or more per year. Under that amount, it’s optional.
That’s it. No complicated paperwork. No legal fees. Just an ABN and you’re in business.
TAX AS A SOLE TRADER
Now let’s talk tax, because this is where sole traders need to pay attention.
As a sole trader, your business income is treated as your personal income. So you lodge just one tax return — your individual return — and you report your business earnings there.
This means you’re taxed at individual income tax rates. If your business does well and you earn over $120,000 — you could be paying up to 37 cents in the dollar in tax.
Compare that to a company, which pays a flat rate of 25 to 30 percent. So as your income grows, your structure might need to grow with it.
You’ll also need to pay PAYG instalments — that’s Pay As You Go — which is basically the ATO’s way of collecting your tax throughout the year instead of one big bill at the end.”
SUPERANNUATION
Here’s something a lot of sole traders overlook your own superannuation.
When you’re employed, your boss pays super for you. But as a sole trader, nobody pays it for you. You have to do it yourself.
You’re not legally required to pay yourself super — but financially, it’s one of the smartest things you can do. You can also claim personal super contributions as a tax deduction, which is a great way to reduce your taxable income.
Don’t leave your future self behind just because you’re focused on building today.
THE BIG RISK — UNLIMITED LIABILITY
Now, the one thing I mentioned at the start. The thing most people don’t think about.
As a sole trader, you have unlimited personal liability. That means if your business gets sued, or can’t pay its debts your personal assets are on the line. Your savings. Your car. Even your home.
There’s no legal wall between you and the business. That’s the trade-off for keeping things simple.
The good news? You can reduce this risk with the right business insurance — public liability, professional indemnity, income protection. Talk to an insurance broker about what suits your situation.
OUTRO
So, is a sole trader the right structure for you? It’s perfect if you’re just starting out, testing an idea, or working independently with low risk.
But as your income grows or your risk increases, it’s worth reviewing whether a company or trust structure makes more sense.
For the official details, head to business.gov.au that’s the Australian Government’s free business resource and everything I’ve covered today is based on their official guidance.
In the blog, we’re covering partnerships what happens when you go into business with someone else.
Note: This blog provides general information based on the resources reviewed and cited in the references. For specialized advice, please consult a licensed professional.
References:
Australian Securities & Investments Commission. (2026). Sole trader? Partnership? Company? Trust?
Australian Taxation Office. (2023, July 5). Business structures - key tax obligations.
Commonwealth of Australia. (n.d.). Business structures. business.gov.au.
