There are many ways to open a company in Australia. Generally speaking, there are 2 main types of structures: 1) entities with legal personality, 2) entities without a legal personality.
One of the entities without a legal personality is the sole proprietorship in Australia, which defines a business that is set up by an individual who wants to set up a business in his or her own name.
If you are a person who wants to open a sole trader in Australia, you will need to conduct similar registration steps as the ones applicable to other company structures.
However, there are many differences regarding the incorporation, and our consultants in company formation in Australia can help you with in-depth information.
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What are the tax obligations of a sole proprietorship in Australia?
If you want to register as a sole trader in Australia you must know that some of the most important differences of this structure compared to other business entities are related to the taxation system.
From a legal point of view, the sole trader is considered to be the same as the person owning the business, and therefore, the sole trader will be taxed following the personal income tax system, and not the corporate tax system, even though the entity is set up for business purposes.
Persons interested in starting a sole trader business in Australia must know that, from a tax point of view, the following apply:
- income below $18,200 is exempted from taxation;
- there are other 4 tax rate thresholds, for the 4 different income tax brackets – $18,201 to $45,000, $45,001 to $120,000, $120,001 to $180,000, and income above $180,001;
- the company can be entitled to the small business entity tax concession if it has an aggregated turnover of less than $10 million;
- the obligation for GST sole trader registration in Australia will appear if the GST turnover is above $75,000;
- GST is currently charged at a rate of 10%.
What are the main characteristics of a sole proprietorship in Australia?
One of the main characteristics is that it is very simple to open a sole trader in Australia. Not only the registration is less complicated compared to other business structures, but it is also simpler to operate.
If you will register as a sole trader in Australia you will benefit from simpler reporting obligations, as the company needs to maintain basic, simple accounting documents.
Some of the steps for company formation in Australia are not mandatory for a sole trader.
For instance, when starting a sole trader business in Australia, the investor can use his or her personal tax file number for completing various administrative obligations, instead of applying for a business tax number.
Another step that is not mandatory for those who will open a sole trader in Australia is that they are not required to set up a corporate bank account. Instead, they can simply use their own bank account for company’s transactions.
However, one can set up a separate bank account only for business purposes; our specialists in company formation in Australia can advise on the procedure.
Please mind that even though the process to open a sole trader in Australia is very simple, and the management of the business is also rather easy, the investor will still have certain obligations.
For instance, it is mandatory to maintain all the financial records of the company for a period of 5 years.
Although this business structure can be set up by only 1 person, it is allowed to hire employee, outside of the person who initiated the sole trader registration in Australia.
If this applies, after the business owner will open a sole trader in Australia, he or she should initiate all the employment formalities applicable here.
We invite you to contact us if you need further information on how to open a sole trader in Australia.