Sole trader regulations in Australia

Posted by Melissa Ramsden in Jul, 2014

What are sole traders?

A sole trader is a simple business structure. Set up in an individual’s name, therefore it is that sole person who manages, operates and is the only person liable for all aspects of their business because in the eyes of the law you and the business are one.

What are sole traders like?

A sole trader is like an Olympic athlete, they might have a team of people helping them to achieve their goal but in the end it comes down to them to achieve it or deal with result if they do not.

What is the purpose of sole traders?

The main purpose of being a sole trader is to be self-employed and provide a product/service for a client and charge for that product/service.

What are the different types of sole traders?

Sole traders can be a corner store newsagent, restaurant, and café to a clothing store. They can also be tradesmen in fields such as an electrician, a plumber, a jeweler, mechanics and any repair service or freelance workers and contractors. Online web based stores can also be operated by sole traders. Even someone in a franchise agreement can be a sole trader.

What’s involved with setting up a business as a sole trader?

To set up your business as a sole trader it is fairly easy to do, it is also inexpensive. You will need to do the following:
• Decide if you will trade under your own name or if you will be naming your business something else you need to register that name with the Australian Securities and Investment Commission (ASIC). The costs for this are $33 for one year or $76 for three years.
• You will need a Tax File Number (TFN), as you will use this when lodging your income tax return
• You will need to apply for an Australian Business Number (ABN)
• If your income is or is expected to be $75000 or more annually, you will also need to register your business for Goods and Services Tax (GST)
• Also if you want your business to have Internet exposure then you will need to register for an Australian Domain Name. You can find a list of registrars accredited on http://www.auda.org.au
Where does the decision to set up a business as a sole trader fit into the process of starting a business?
The initial decision (preferably made with an accountant) when starting a business because you cannot structure and begin to start up your business until you have made that decision.

How does operating as a sole trader impact on different areas of a business?

Operating as a sole trader impacts on a couple of different things:
• Tax: a sole trader pays tax at the personal rate of income tax. They can be eligible for some concessions depending on the annual turnover.
• Superannuation: A sole trader has to look after his or her own super.
• Legal: The sole trader is solely liable for the business. If someone was to sue the business they are suing the sole trader, they are one and this means all of their personal assets are at risk. There can be problems for the continuity of the business if the sole trader was to pass away
• Expansion: this type of business is limiting for expansion

What terms are used when setting up a business as a sole trader?

Propriety: relating to an owner or ownership
Enterprise: a business or company
Entrepreneur: Someone who shows initiative by organizing a venture to take benefit of an opportunity
Asset: something that an entity has acquired or purchased and that has money value
Liability: a claim against assets or legal obligations of a person or organisation, arising out of past or current transactions or actions.

Where can I find more information about setting up a business as a sole trader?

The following websites have all the information needed to set up as a sole trader with links provided to help with all the steps required.
• The Australian Taxation Office website: http://www.ato.gov.au/Business/Starting-and-running-your-small-business/Starting-your-business/Choosing-your-business-structure/Sole-trader/
• The Queensland Government website for industry and business: http://www.business.qld.gov.au/business/starting/business-startup-options/business-legal-structures/sole-trader-structure
• The Australian Government Department of Industry website: http://www.innovation.gov.au/smallbusiness/LegalHelp/LegalTopics/BusinessStructures/Pages/SoleTrader.aspx

Who would most benefit from this knowledge?

An experienced person wanting to master this skill would benefit most from this knowledge.
This knowledge would be needed for the business owner and possibly a senior manager (depending on what role they have in the business). This would also depend if the business were completely operated by the owner in which case there would be no staff in need of this knowledge.
This business could fall under all local, state and country law jurisdictions.
There would be no impact by cultural influence.
Climate would also have no impact in this area.
This information would be relevant to startups and small to medium enterprises.
This information would be most relevant to all industries.