GETTING SET UP AS A SOLE TRADER
Are you thinking about becoming self employed? There is some important information you need know about becoming a Sole Trader.
You will need to get an Australian Business Number (ABN)
Having an ABN ensures no withheld payments when you issue an invoice. Without quoting an ABN, business clients are required to withhold 46.5% of any payments. We offer ABN applications for $110 and will need the following information:
Your full name
Date of Birth
Tax File Number
Postal Address and Business Address
Type of business – what are you selling/services are you providing?
Registering a Business Name
You don’t have to register a business name if you use your own name. If you choose not to use your own name you will need to register a business name with the Australian Securities and Investments Commission. Before choosing a name check its availability by checking the National Names index and if you plan on trading online it’s a good idea to check that a suitable domain name/address is also available. You will need to ensure that your new business name is linked to your ABN by contacting the Australian Tax Office. If you wish to legally protect your business name and stop other businesses form using it, you’ll need to trademark it.
Record Keeping
It’s really important you keep all receipts and invoices that relate to your expenses and income. You also need to keep any personal transactions separate from your business. The easiest way to do this is to set up a separate bank account. You should also consider implementing accounting software to keep track of your income and expenses.
How Much Tax Will I Pay
Any profit you make is calculated using the Individual Income Tax Rates.
| Taxable Income | Tax on this Income |
| $0 to $18,200 | Nil |
| $18,201 to $37,000 | 19c for each $1 over $18,200 |
| $37,001 to $90,000 | $3,572 plus 32.5c for each $1 over $37,000 |
| $90,001 to $180,000 | $20,797 plus 37c for each $1 over $90,000 |
| $180,001 and over | $54,097 plus 45c for each $1 over 180,000 |
All your business expenses and income are included in your personal tax return. Unlike employees who have tax taken out of their salary, you will need to put money aside to pay tax at the end of the year. After your first profitable year of business you will be introduced to the Pay As You Go (PAYG) instalments system. This means you will make payments in advance quarterly towards the expected amount of tax payable at the end of the financial year.
GST
You will need to register for GST if your sales exceed $75,000 per annum. If you will provide taxi or limousine travel for passengers (including ride-sharing) you will need to register for GST regardless of your annual turnover.
When you are registered for GST you will need to lodge BAS returns each quarter. The ATO will impose penalties if these are not lodged on time. Accounting software will be needed in order to calculate your GST liability. We offer yearly subscriptions for several different software providers and highly recommend Quickbooks and Xero.
Employing Staff
Employing staff comes with added expenses that you will be liable to pay every quarter. These include:
Pay as You Go Withholding Tax
Superannuation
Workers Compensation
These are included in your quarterly BAS along with your GST obligations. Due to the complexity of payroll you will need accounting software to correctly calculate the tax to withhold, superannuation guarantee and leave entitlements for employees.
You’re also responsible for your own superannuation. When making personal super contributions you may be eligible to claim a deduction. You will first need to notify the fund of your intention to claim a deduction. Once you receive confirmation, you are able to claim the super contribution as a personal deduction on your tax return.
