What is a Sole Trader?

A person who wishes to go into business can simply trade under their own name. They can also trade under a business name by registering a trading name in the state(s) in which they wish to trade.

Advantages

• Simple.
• Lesser compliance burden.
• Lower maintenance costs.
• Capital Gains Tax discounts.
• Total control of assets.
• No set-up costs.

Disadvantages

• No asset protection - the individual person is liable for all business debts and potential litigation.
• The structure has a limited life, as on the death of the individual the investment must change hands.
• Taxed at the individual's marginal tax rates.
• Inflexible tax planning.

Compliance Requirements

• ABN registration - compulsory.
• GST registration - if turnover is over $50,000.
• BAS - monthly or quarterly, if registered for GST.
• Tax Return - yearly.
• Financial Records - income and expenditure statements.

General Comments

This type of structure is suited for someone with little or no assets,  and who is starting out in business with little turnover. The income tax is either paid at the end of the year after lodgement of tax returns, or paid through an Income Activity Statement (IAS) during the year, with an adjustment at the end. The owner takes drawings, as opposed to wages.