Outgrowing sole trader status
You’re a sole trader, business reporting is simple, and your only responsibility is to yourself – and your customers. But enter into a partnership or take on company status, and you’ll have to tick a few more registration and reporting boxes to comply with the regulations. So where do you start?
As a sole trader you are the only owner of your business and have complete responsibility for all aspects of it. But if you expand, take on more staff or a partner, you may want (or have) to change your business structure. Two of the most common types beyond sole trader are:
If you expand to become either of these structures, it will affect your registration and tax obligations.
You cannot use your personal Australian Business Number for your business once you grow beyond being a sole trader. A partnership or company will need its own ABN that is distinct from your (and other partners’ or members’) personal number.
If your business wants to trade under a different name to its legal name (which could be your own name), you’ll need to register it with the Australian Securities & Investments Commission (ASIC).
When coming up with a new business name it’s important to consider whether a suitable domain name is available for your website and emails. So it’s a good idea to choose both at the same time.
If you’ve chosen to expand to become a company, it must be registered under the Corporations Act 2001.
If you are scaling up from sole trader status, you’re most likely to become a ‘proprietary limited company’ (Pty Ltd) Ltd.
If you’re not already registered, and your business is likely to turn over more than $75,000 per year, you must register for GST. Just to be clear, the $75,000 refers to income, not profit.
If you anticipate passing this milestone during a current financial year, you should register within 21 days of ‘realisation’.
Depending on the way you run your business, you may also have to register for Pay as You Go (PAYG) withholding tax, or for elements such as Fringe Benefits Tax. The good news is that you can find out more about these taxes and do all your registering via a single portal.
You can apply for an ABN, register your business name and company, and register for GST and other taxes, all on the business.gov.au website.
With your new company status you’ll need a business bank account, to clearly separate your personal financial affairs from your business ones. You might like to consider one of the business bank accounts1 offered by Westpac.
With the expansion of your business you may also wish to set up a bookkeeping system incorporating small business accounting software. And if you don’t already have an accountant, now’s the time to appoint one to help you manage your income, expenditure, expenses and cash flow, and to receive specific guidance at tax time.
You’ll need to think about how to take payments, which could be with cash, through direct transfers into your bank account, by credit card over the phone, or using a portable EFTPOS terminal. Generally, the more options you can offer the better.
You may also want to think about how to send invoices. An easy and convenient option could be Westpac’s online invoicing tool - Biz Invoice.
Our handy tool is available complimentary with eligible bank accounts via online banking1 and incorporates an invoice template you can customise with your name and logo. Set it up in minutes, then on your mobile or PC you can generate, send and manage your invoices anytime, anywhere2.
Please note that if linked to a foreign currency account, Biz Invoice will not calculate GST or any tax that may be required in your customer's country. Payment of foreign currency account invoices can only be made using direct deposit via international transfer.
Good luck with your expanded venture. If you need any help with running and growing your business, you’ll find plenty of assistance on the Westpac Help for your business page.
1. To be eligible for Biz Invoice you must hold a Westpac Business One Low Plan or Business One High Plan transaction account or a foreign currency account (other than in Chinese Yuan RMB) and be registered for Westpac Live Online Banking. Terms, conditions and fees apply. Before making a decision, read the disclosure documents for your selected product or service, including the Product Disclosure Statement and T&Cs, by clicking the above links and consider if the product is right for you.
2. Subject to system availability. Internet is required to access Online Banking.
The information in this article (including any related to tax) is general in nature and does not take your objectives, financial situation or needs into account. Consider its appropriateness to these factors; and we recommend you seek independent professional advice about your specific circumstances before making any decisions.