A sole proprietorship is one of the easiest ways to set up a new business in Australia. Because of several advantages and cost-effectiveness, there has been a steady rise in the number of sole traders in recent years. Australia had over 1.5 million sole proprietors just before the pandemic.
But before starting a new business venture, it is essential to review business structures existing in the country. So, let us look at the common business structures in Australia:
A sole trader is legally responsible for all aspects of the business, including debts, losses, and managing important decisions. You have total control over the assets of your company. The tax has to be paid on any income you earn.
Partnership refers to a group of individuals running a business. The income and losses are divided among partners based on a written business agreement.
It is a legal entity separate from the original business owner. The owner must register their business with the Australian Securities and Investments Commission (ASIC). Companies can pay the tax and GST if the turnover is more than $75,000 a year.
A trust refers to a business type where the company holds property or income for the benefit of others. A trustee (individual or a company) is responsible for any debts and liabilities. Profits earned from the trust go to the beneficiaries.
Who Can be a Sole Proprietor in Australia?
Anyone who is self-employed or works essentially for themself can be qualified as a sole trader. Freelancers can also register as sole traders if they have an Australian Business Number (ABN). Foreigners opting to expand as a company or sole proprietorship in Australia must have the following:
- ~Valid Australia business visa
- ~A business owned solely by one individual
- ~Australian Business Number
Benefits of Sole Proprietorship in Australia
Every business structure has its set of advantages and disadvantages. The benefits of setting up a sole proprietorship in Australia are:
- ~It is easy to set up and manage
- ~You get complete control over the assets and on making crucial business decisions
- ~There are fewer compliance requirements
- ~Sole proprietorship in Australia cost is low and affordable
- ~There are no tax complications. You will be taxed as an individual on the business's total profit
Documents Required for Registering Your Business in Australia
To register as self-employed in Australia, you should have the following documentation:
- ~Business Name: If you wish to use a name other than your personal name, you must register it with the Australian Government Business Registration Service
- ~Trademark: To protect your brand, product, or services, you will have to procure a trademark to own the rights of your business name fully
- ~Australian Business Number (ABN): The Australian Business number is a unique number identifying businesses in Australia
- ~Tax File Number (TFN): The Tax File Number could be your TFN in a sole proprietorship
- ~Register for Goods and Services Tax (if applicable): Sole traders need to register for GST if the annual turnover is $75,000 or more
- ~Additional licenses: Depending on the nature of the business, you may need specific local, state, or national licenses or permits
How to Register a Sole Proprietorship in Australia?
For setting up a sole proprietorship in Australia, you need to go through the following steps:
- ~Register a business name
- ~~Decide the name of your sole proprietorship in Australia. Register the business name in the official business register if you want to operate under a different name other than your own.
- ~~Select a unique name and ensure it does not infringe upon any already existing businesses in Australia.
- ~~To protect your brand and product identity, you can apply for a trademark.
- ~Apply for Australian Business Number
- ~~The ABN is very crucial at the time of registration, payments, and taxation.
- ~~Apply online with your identity documents, details on your services, and tax number.
- ~Tax registration
- ~~A sole proprietor is taxed on business income as a personal tax return. So, there is no need for a separate business tax file number.
- ~~Register personal tax file number with the Taxation Office.
- ~~If your business has a minimum turnover of $75,000, you must register for GST.
- ~~If you decide to employ workers in the future, you must register for Pay as you Go (PAYG) withholding tax.
- ~~There could be additional taxes depending on business activities and revenue generated.
- ~Other licenses and permits
- ~~You may be liable to specific licenses and permits depending on the nature of your business and the services offered.
- ~~Check with the Australian Business License and Information Services.
- ~Set up a bank account
- ~~Set up a separate bank account for your sole proprietorship in Australia to clearly distinguish between personal and business expenses.
- ~~It is easier to maintain the financial records required for taxation or paying the employees.
Setting up a sole proprietorship in Australia is comparatively easy, with minimal steps once you have the necessary documents. It is essential to know which departments to approach for various registrations and go step-wise. When establishing a sole proprietorship in Australia, you must concentrate on a business plan and execution. A global employment solution like Multiplier can help you onboard and pay employees in Australia.
Multiplier has a local presence in over 150+ countries. Naturally, our experts are well-aware of the rules and compliances required for business entities. You can get in touch with our qualified team to help you with all documentation and manage the payroll anywhere.
Frequently Asked Questions
How long does it take to get an ABN?
The application for an ABN can be processed immediately or may even take up to 20 days. You can check the status of your application on ABN Lookup.
What is a super contribution for a sole proprietorship in Australia?
Super is the money paid to your employees for their retirement. You don't have to pay a super guarantee for yourself in a sole proprietorship, but you can do it as a savings plan for retirement.
Who regulates sole proprietorships in Australia?
There is no specific legislation regulating sole traders, but depending on the nature of business and services, they have to comply with particular laws, local or state.