How to set up a Sole Trader business in Australia?
Of all the business forms, sole tradership is the most straightforward business structure out there; incurring the least amount of set-up cost. This means that you are the single owner of your business, therefore, any income generated from your business belongs to you and only needs to be declared in your individual tax return. Any tax you may pay is levied on you at your individual income tax rate. In other words, you don’t need to have a separate account for your business’s incomes and expenditures for it’s tax purposes.
All the business decisions are made by you and you are solely accountable for any losses incurred or in case anything goes wrong. You do have the option to hire employees in your business, in that case you also need to ensure that your employees are getting their minimum employee entitlements and conditions, such as superannuation. If you are providing fringe benefits to your employees, then you have to be registered for Fringe Benefits Tax, because you are legally obliged to pay taxes on the value of fringe benefits offered to your employees.
In addition to registering for FBT, you also need to register for Pay As You Go (PAYG) withholding. This allows you to withhold any portion of your employees’ wages or salaries for tax purposes. However, you must remember to forward these tax amounts to Australia’s tax office.
As a sole trader, it’s not mandatory for you to pay for your own super as technically you are not an employee of your business, however, you can contribute to super so that you can save for your retirement, in fact, it is highly recommended to do so. If you do contribute to your own super, you need to ensure that your super fund has your tax file number (TFN).
Being a sole trader you may choose to register your business name or use your own name as your business name. If you are opting for the former, you need to nationally register your business name with the Australian Securities & Investments Commission (ASIC), which allows you to use your registered business name in any state or territory within Australia. It does come with an associative cost of $37 for a one year business name registration, and $87 if you want to register the business name for a 3-year period.
It is important to be aware that registering your business name for a certain period of time only means that other businesses will not be able to register under the same name for the period of time that you are registered into; however, they may use your name for any product or services. Therefore, you can also trademark your business name on the IP Australia website, in which case your business name is protected for at least 10 years.
Alongside your business names, you may also register for a domain name for your business, regardless of you setting up a website right now. Usually, for a registration period of one year the domain name registration costs from $10 to $100. You can register your business website on business.gov.au. As a sole trader, you may have multiple businesses, in that case you can register for multiple business names for all your different businesses.
In summary as a sole trader business, you will need to have the following registrations:
| Australian Business Number (ABN) | No Cost | Mandatory |
| Business Name | $37+ | Optional, you can use your own name |
| Pay As You Go (PAYG) Withholding | No Cost | Mandatory if employee is hired |
| Fringe Benefits Tax (FBT) | No Cost | Mandatory if Fringe Benefits are offered |
| Goods & Services Tax (GST) | No Cost | Mandatory if annual GST turnover is worth $75,000 or over |
As a foreign investor another important thing to note is what kind of visas are applicable for you, so that you are able to legally set up and operate your business. Currently business visas are provided under the Business Innovation and Investment Program (BIIP). There are four classes of BIIP:
- Business Innovation Visa (188A);
- Business Investor visa (188B);
- Significant Investor Visa (188C);
- Entrepreneur Visa (188E).
In order to understand which 188 visa class is suitable for you, you can seek professional and reliable immigration legal advice. We have a team of immigration lawyers who are specialists in this field, therefore, if you have any questions please do not hesitate to contact us or book a consultation.
For more information, please visit:
