A sole trader is an individual carrying on a business in their own name. The business is not a separate legal entity: income flows through to the individual's personal income tax return, and the owner is personally liable for all the business's debts.
Tax and reporting obligations
- Lodge a personal income tax return each year, reporting business income and expenses in the business and professional items schedule.
- Register for an ABN and GST (if annual GST turnover meets the $75,000 threshold).
- Lodge BAS (quarterly or annually, depending on GST turnover).
- If employing staff, register for PAYG withholding and report through STP.
- Pay superannuation guarantee contributions for eligible employees.
Sole trader vs company
Compared with a company structure, a sole trader has lower set-up cost (no ASIC fees), simpler reporting (no company tax return), and no requirement for a Director ID. The trade-offs are personal liability for all business debts, no access to the lower company tax rate (25% for base rate entities), and limited ability to split income or access small business concessions that require a company or trust.
Does a sole trader need a separate bank account?
There is no legal requirement, but a dedicated business bank account is strongly recommended for clean bookkeeping, easier BAS preparation, and clearer audit trails. Mixing personal and business transactions significantly complicates the work of any accounting firm.