Sole Trader Tax Frequently Asked Questions
You are a Sole Trader if you own, control and manage the business under your personal name. You are personally responsible for all aspects of your business, including profits, losses and unlimited liabilities if things go wrong.
Sole traders need to apply for an ABN for your business dealings as businesses are required to quote an ABN when providing an invoice and or quote for any goods or services they have or may render to their customers.
Your Individual Tax File Number (TFN) can be used when lodging sole trader income on Individual Tax Return.
Before you apply for a Sole Trader ABN, you need to be assured that that’s the right business structure. We can assist with your ABN Registration (including GST and PAYG Instalment application) on same day securely for $80.
Alternatively, you can apply for the ABN yourself via https://www.abr.gov.au/business-super-funds-charities/applying-abn
To complete your Sole Trader ABN application you’ll need your:
- Tax File Number (TFN) and the TFNs of any associates such as joint business partners.
- Tax agent registration number, if you have one.
- Financial advisor number – if you’re using the services of a financial advisor, you can provide their AFS licence number.
- Previously held ABN.
- The date your ABN is required. This should be the date that you expect to start any business activities. This date cannot be more than 6 months in the future when you apply
- Entity legal name – this legal name will appear on all official documents and legal papers.
- Authorised contacts – eg the applicant or their tax agent. They must be authorised to make changes and or update information on behalf of the entity.
- Business contact details: including an address, postal address, email address and contact number. Your email address must be between 5 – 200 characters, contain no spaces and not start with “support@”, “Sales@” or “info@”
- Business activity – state your main source of income activity for your business eg construction, investment or agriculture.
- Business locations – provide the business location(s) for all premises operated by your business. An exception to this is if there’s a risk to the safety of people as a result of the disclose e.g. a women’s refuge.
GST stands for Goods and Services Tax and is included to every purchase in Australia, except for GST Exempt and GST Free items.
You can find a full list of GST Free Goods and Services via this ATO web page https://www.ato.gov.au/business/gst/when-to-charge-gst-(and-when-not-to)/gst-free-sales/#MainGSTfreeproductsandservices
10% is the GST rate. It’s added on most sales in Australia, except for GST Exempt and GST Free items.
Sole Trader GST threshold is $75,000 per financial year.
You must register for GST if your:
- annual turnover is more than $75,000; or
- when you start a business or company and expect your turnover to reach the GST threshold (or more) in the first year of operation
Sole Traders are individuals hence is taxed at individual income tax rates and the tax-Free threshold is $18,200. You lodge quarterly Instalments Activity Statements (PAYG) to pay off tax throughout the year.
Individuals and Sole Traders are entitled to the tax-free threshold of $18,200 in the 2012/13 to 2024/25 financial years.
A Sole Trader business structure is taxed as part of their own personal income. This means Sole Traders are taxed at Individual Income Tax Rates and entitled to a tax-Free threshold of $18,200.
Sole traders can lodge and pay quarterly Instalments Activity Statements (PAYG) to pay off tax throughout the year.
There is no Sole Trader Tax Return. A sole trader lodges an Individual Tax Return with their personal TFN and sole trader ABN, and declare business income under the sole trader and or business schedule(s).
There are no compulsory superannuation guarantee requirements for sole traders or contractors. However sole traders and contractors may want to make personal contributions to your super account as a way to save towards retirement.
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