How to register as a sole trader in Australia

Summary

A sole trader and their business are the same legal entity, meaning you keep full control and face minimal setup costs, but also carry unlimited personal liability for any business debts.
The most critical registration step is getting an ABN, which is free and can be done in minutes at abr.gov.au. Without one, clients are required to withhold up to 47% of payments made to you.
A business name registration is only necessary if you're trading under a name other than your own, and GST registration only becomes compulsory once your annual turnover hits $75,000.
Unlike salaried employees, sole traders are responsible for managing their own tax, including paying PAYG instalments throughout the year and lodging all business income through their personal tax return.
Opening a dedicated business bank account and making voluntary super contributions are not legally required but are both strongly recommended habits that simplify accounting and protect your long-term financial wellbeing.

What is a sole trader?

If you're planning to register as a sole trader, start with the structure itself. A sole trader runs a business as an individual. In other words, there’s no legal separation between you and your business.

You own the assets, keep the profits, and are personally responsible for all debts. More than 1.5 million Australians operate as sole traders, making up around 60% of all actively trading businesses nationwide.

Is the sole trader structure right for you?

Before jumping in, it's worth checking whether this structure is right for you.

Pros of being a sole trader

Being a sole trader comes with some clear benefits. Here's what makes it appealing:

It's simple and cheap to set up, with no company registration fees
You have complete control over business decisions
You report income through your personal tax return
It's easy to wind down if your plans change

Cons of being a sole trader

There are trade-offs worth knowing about before you commit:

You have unlimited personal liability for business debts
You can't issue shares or bring in investors easily
Tax rates can climb quickly as your income grows
It may be harder to access business finance compared to a company

Who is it best for?

Starting a sole trader business works well for freelancers, contractors, tradespeople, and consultants.

Sole trader vs company: key differences

Understanding the sole trader structure also means knowing how it differs from a company. A sole trader and their business are the same legal entity. A company is separate.

As a sole trader, your personal assets are at risk if the business has debts. A company director's assets are generally protected.

Sole traders pay income tax at personal rates, up to 45%. Companies pay a flat rate and can distribute profits to shareholders. A company also brings higher setup costs and ongoing ASIC obligations.

Knowing how to register as a sole trader in Australia is simpler than most people expect. Here's what you need to do.

Step 1: Get a Tax File Number (TFN)

As a sole trader, use your existing personal TFN. Most Australian residents already have one. If you don't, apply through the ATO.

Step 2: Apply for an ABN

Getting an ABN for a sole trader is the most important step. Without one, other businesses must withhold up to 47% of payments they make to you.

You can't register for GST or claim deductions without an ABN. Apply for free at abr.gov.au.

Step 3: Register a business name (if needed)

Does a sole trader need a business name? Only if you're trading under a name other than your own.

Registration costs AUD $45 for one year or AUD $104 for three years via business.gov.au. For exclusive rights to your name, register a trade mark with IP Australia.

Step 4: Register for GST (if required)

You must register for GST if your annual turnover reaches or is expected to reach AUD $75,000. Register within 21 days, alongside your ABN if possible. Some sole traders register voluntarily to claim GST credits on business purchases.

Step 5: Register for other taxes and obligations

If you hire employees, register for PAYG withholding to deduct tax from their wages. Check ABLIS for industry-specific obligations in your state or territory.

How much does it cost to register as a sole trader?

Registering as a sole trader can cost nothing. An ABN and TFN are free.

If you register a business name, fees apply depending on the term. Other costs depend on your industry.

Licences and permits you may need

Once you know how to register as a sole trader, check for licences or permits required in your industry. Common examples include food handling permits, building licences, and transport permits. Check ABLIS at ablis.business.gov.au for what applies to your situation.

Sole trader tax obligations in Australia

Now that you know how to register as a sole trader, tax is the next big priority. Sole trader accounting differs from regular salary accounting. Tax isn't withheld automatically, so you're responsible for tracking and paying it yourself.

You report all business income on your personal tax return at individual rates. For 2025-26, income up to AUD $18,200 is tax-free, rising to 45% on income over AUD $190,000.

Pay PAYG instalments throughout the year to avoid a large bill at year's end. Keep records for at least five years.

Sole trader tax deductions you can claim

One advantage of sole trader accounting is the ability to reduce taxable income through legitimate deductions. Common claims include home office costs, vehicle and travel expenses, professional development, marketing, accounting and legal fees, and equipment.

Only the business-use portion of mixed-use expenses is deductible. Keep receipts to support your claims.

Superannuation as a sole trader

You're not legally required to pay yourself super as a sole trader. Voluntary contributions are still a smart move. Concessional (pre-tax) contributions are taxed at 15% inside your super fund, well below the top rate of 45%.

The concessional cap for 2025-26 is AUD $30,000, and they're tax-deductible. If you hire employees, pay the Superannuation Guarantee at 12% of their earnings.

How to open a business account as a sole trader

After registering as a sole trader, opening a dedicated bank account is a smart next step. It keeps business and personal finances separate, simplifying sole trader accounting and making tax time far less stressful. Look for an account with low fees, easy digital access, and integration with accounting software.

Conclusion

At Aspire, we know that getting started as a sole trader involves more than just registration. Understanding your tax obligations, sole trader accounting, and how to manage your finances are all part of the journey.

Registering as a sole trader is a straightforward first step. From there, building strong financial habits early sets your business up for long-term success.

FAQs

Here are answers to common questions about registering as a sole trader in Australia.

How do I register as a sole trader in Australia?

The process for registering as a sole trader starts with applying for an ABN at abr.gov.au. If you're trading under a name other than your own, register it with ASIC. Register for GST once your annual turnover reaches AUD $75,000.

How long does it take to register as a sole trader?

Registering as a sole trader can take as little as 15 minutes. Your ABN is usually issued immediately if all required information is provided online.

Do I need a separate bank account as a sole trader?

While it's not legally required, opening a dedicated sole trader bank account is strongly recommended. It makes accounting and tax reporting far simpler.

Can I hire employees as a sole trader?

A sole trader can hire employees but cannot employ themselves. You'll need to register for PAYG withholding and pay the Superannuation Guarantee at 12% of their ordinary time earnings.