Starting your own business can be an exciting and rewarding experience, and one of the simplest ways to do it is by becoming a sole trader. As a sole trader, you’ll have full control over your business and be solely responsible for its debts and liabilities.

But, while it may seem like the most straightforward business structure, there are still a few things to keep in mind, particularly when it comes to tax obligations. 

Don’t let this scare you, though! 

The Australian Taxation Office (ATO) has a wealth of resources that can help you manage all your affairs in one place, including the information you need to claim a deduction, the implications when you decide to employ people, and how to pay tax. 

In this guide, we’ll walk you through everything you need to know about starting a business as a sole trader, including registering your business, managing your tax obligations, and making the most of the ATO’s online services.

What is a Sole Trader?

A sole trader business structure is where an individual runs their own business and is legally responsible for its associated debts and liabilities. 

As a sole trader, the ATO considers you self-employed and operating under either your own name or a business name. You make all the decisions and take full responsibility for the profits and losses of the business. As such, you will have several responsibilities, including keeping accurate financial records, registering for an Australian Business Number (ABN), individual Tax File Number (TFN) and Goods and Services Tax (GST) if the government requires you to. 

You must also lodge an annual ATO tax return to declare your business income, either by yourself or with the assistance of a registered tax agent. 

Additionally, sole traders have no legal distinction from the business, so you need to keep in mind that you are personally liable for all debts and legal actions taken against the business, which means your personal assets can be at risk if your business is unable to meet its obligations. 

You might be interested in reading our guide to The Most Common Types of Business Structures in Australia. 

Do Sole Traders Pay Tax? 

As we mentioned before, sole traders have certain tax obligations that they need to fulfil to stay compliant with the laws in Australia. Some of the main tax obligations for sole traders include the following:

• Registering Goods and Services Tax (GST):  If your business has a turnover of $75,000 or more per year, you must register for GST, which can be done through ATO online services (see discussion below). 
• Reporting and paying GST if your business (where applicable): GST is a consumption tax of 10% on most goods and services in Australia. The government will require you to register for GST and charge GST on all taxable sales you make if you meet the criteria, but you can also claim GST credit for GST generally included in the price of goods and services you buy for your business.
• Lodging an income tax return every financial year: This is done to declare your income, expenses, and tax deductions. You can also do this through ATO’s online services, which provide a range of tools to help you calculate your tax liability and keep track of your deductions.
• Paying the right amount of tax on time: Business owners must meet deadlines to avoid penalty and interest charges.
• Keeping accurate financial records: The ATO requires small business owners to keep track of their income and expenses for tax purposes, which will also help you determine your profit or loss for the financial year.
• Meeting superannuation obligations: As you are essentially self-employed, it’s your responsibility to ensure that you pay super. 

It’s worth noting that the tax obligations for sole traders can vary depending on your specific circumstances and business type. As such, it’s always a good idea to seek professional advice from an accountant or the ATO if you have any questions. Additionally, there may be other state-specific regulations and compliance measures that a sole trader might have to follow, so it helps to have someone to guide you in the right direction.

ATO Sole Trader Online Services

The ATO’s online services provide a convenient and comprehensive solution for managing your sole trader tax and super affairs. In addition to a ‘click to chat’ function, these services allow you to easily take care of various aspects of your finances all in one place, such as:

• Updating your personal information, including your address and bank account details
• Viewing and accessing your tax-related information, such as your employment income statement, account balance, and notice of assessment
• Lodging and paying your taxes by using myTax, keeping track of the progress of your lodgement, and easily make payments 
• Managing and lodging activity statements, as well as managing your PAYG instalments and print copies of statements for reference
• Viewing, managing and accessing your superannuation, checking balances, or searching for lost super accounts
• Receiving notifications and communications from the ATO in your myGov Inbox.

The best part is that most of these services are free – you only need to sign up once with myGov and link it to the ATO website. Moreover, once you’ve registered, it’s simple enough so that most people can do it without always having to enlist the help of an accountant or other professional advisory company.  

You’ll also have access to various tools, such as calculators, to help you determine how much you owe or money you’re due from refunds.  

Why You Should Still Consider Hiring an Accountant 

Although managing your taxes using the ATO’s online services is simple enough, getting an accountant on board is still a good idea when navigating the broader aspects of running a small business. 

An accountant can provide valuable insights into reducing taxable income by taking advantage of available deductions or credits you may not have otherwise considered. They can also help you guide the obligations related to hiring eligible employees, as well as ensure all your records are maintained and in compliance with taxation laws in Australia – something that may be difficult without prior experience in accounting or taxation law. 

Plus, they can advise you on tax planning and forecasting to help you manage your cash flow and make informed business decisions. 

How Can Box Advisory Services Help with Your ATO Tax Return?

The Box Advisory Services’ accounting team can offer invaluable assistance to sole traders looking to manage their taxes and bookkeeping responsibilities. Our team of experienced professionals will get acquainted with the unique aspects of your business to customise assistance for all your accounting needs. 

We can help develop specific plans and practices tailored to your needs that simplify keeping up with taxes and accessing other financial information. Our team of Chartered Accountants and Tax Advisors offers a comprehensive range of services, such as tax preparation, payroll management, cash-flow analysis, general ledger maintenance, financial forecast systems and more. 

Their up-to-date knowledge of regulations and laws related to taxation makes them especially trusted advisors to link arms with you as you forge ahead towards better financial planning for your business.

Let’s get started today. 

Key Takeaways

Overall, starting a business as a sole trader in Australia is a relatively straightforward process, but it’s essential to understand your tax obligations and how to use the resources that the ATO provides to help you manage them. 

The ATO’s online services provide a convenient and comprehensive solution for managing your tax and superannuation fund affairs, but it’s still a good idea to consider getting an accountant on board to help ensure you’re meeting all your obligations and to provide valuable advice on managing your finances.

If you want to learn more about our sole trader services here at Box Advisory Services, schedule a FREE consultation today.