bookkeepingSmall BusinessSole TraderStructure

What is a Sole Trader

[tagline_box shadow=”no” border=”1px” highlightposition=”left” title=”A Sole Trader is a business where you are the sole (only) owner of the business. You can trade in your own name – Pete Smith trading as Pete’s Plumbing, for example. The owner of the business and the business itself are considered to be the one entity.” description=”” ][/tagline_box]
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Benefits of Being a Sole Trader

  • Easy to setup and low start up costs
  • You don’t need to lodge a separate tax return
  • Reduced regulations

Disadvantages of being a Sole Trader

  • Personal assets are at risk
  • Net Profit assessed at personal marginal tax rates
  • As business starts to take off, more responsibility and complications
  • May not be able to offset business losses with non-business income

Does a Sole Trader need to register for GST?

  • If the business registers a turnover of more than $75,000 it is compulsory to register for GST
  • You can voluntarily elect to register if your turnover is below this threshold
  • If you do register, you must comply with your Business Activity Statement obligations

Can a Sole Trader hire Employees?

  • You can hire employees, but if you do, you need to be registered for PAYG withholding. You also need to understand what tax you need to withhold from any salary, and you may need to pay superannuation for each employee
  • PAYG tax and superannuation will depend on the salary level paid to any employees

How do I account for my Sole Trader business?

  • You need to keep track of all business income and business expenses (including assets)
  • You need to keep copies of all receipts and invoices (currently for at least 5 years)
  • There is a section in your personal income tax return to declare net income from business activities. This is then added to any other income earned from other sources and taxed at individual tax rates.
  • We always advise speaking with a qualified accountant to ensure you are claiming only those items you are eligible for.

This is a general guide only. Please speak with Healthy Business Finances today to discuss any questions you have in relation to your specific business.

(Please note that all information is correct at time of printing}