Business basics for sole traders

So, you’ve decided to work for yourself, or expand a hobby into a career. You’re not alone – some 60% of Australian businesses are run by sole traders. But what are the first things you should think about to get your business off on the right foot? 

Consider your status

You’re a sole trader if you are the only person involved in your business and you have complete responsibility for all aspects of it, including debts and losses. If this is you, you’ll be using your individual Tax File Number (TFN) when reporting your earnings to the Australian Tax Office (ATO).

 

You can appoint others to help you – such as an accountant – but if you actually employ people in your business, you may not have sole trader status and may have to apply for a separate TFN. 

Think about a business name

If you’re just using your first and last name, that’s fine – and there’s no need to register it anywhere. But if your business name has extra words, such as Oliver Smith Plumbing, or is something else completely, you’ll need to register it with the Australian Securities & Investments Commission (ASIC). But before you do that:

Get an Australian Business Number

Your ABN helps identify your business in public records and facilitates interactions with banks, the tax office, and other government departments. It’s used when you create purchase orders and invoices, and is required if you have to register for GST (see below).

 

The good news is that you can apply for your ABN and register your business name online at the same place, on the business.gov.au website.

Ask yourself, do I need to register for GST?

If you think your business will earn $75,000 or more, you’ll need to register for goods and services tax through the same business.gov.au website or the Australian Taxation Office (ATO) website. Just to be clear, the $75,000 refers to income, not profit – and if you anticipate passing this milestone during a current financial year, you should register within 21 days of ‘realisation’.

 

The 10% GST you collect is reported to the ATO through your business activity statement (BAS), where it can be offset against any GST you incur in your business.

Set up a bank account

It’s not compulsory to have a business bank account as a sole trader, but it’s a good idea to separate your personal financial affairs from your business ones. You might like to consider one of the business bank accounts offered by Westpac¹. 

Appoint an accountant

It isn’t compulsory to choose an accountant or financial adviser, but it’s a good idea. At the least their advice will help you claim the right amount of deductions you’re allowed to against your business, and determine at what frequency you submit your BAS.

 

How to find an accountant? One way is to simply ask around your friends and any business networking organisations you belong to, and check out any accountants that are recommended. 

Now start making money!

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 machine. Generally, the more options you can offer the better.