Sole trader is the term utilised for ventures that may not generate more than 75,000 dollars in the initial year since its launch. It also signifies that a single entity owns the business, not a group of stakeholders. We have outlined below three crucial things that you need when starting up as a sole trader.
Registering an Australian Business Number (ABN)
Regardless of the business structure, you will need to register an ABN. This is particularly essential for a small-scale entrepreneur because there are taxation laws in Australia that, in a sense, limits the type of clients that he can have. To illustrate, the ABN is supposed to appear on the invoice that they will send to the clients. If it is not there and the client pays the amount on the bill, the client will have to create a separate withholding tax account for it. Because it entails more paperwork for them, different businesses may choose not to transact with a sole trader that does not have an ABN.
What’s the purpose of an ABN?
The business owner will be able to reimburse expenses he has spent for traveling for work purpose, equipment purchases, and work clothing, via tax deductions. However, when the individual has an ABN, it means that he needs to produce a full state of all the business activities the business has participated in during that year. This serves as the tax return’s counterpart.
How to begin the ABN application process?
There are three ways that you can apply for an Australian Business Number. The easiest option is through an online application, where you can simply visit the Australian Business Register (ABR) website and follow the prompts and provide the requested information.
If you are unable to go through their website, you can also contact the Australian Taxation Office (ATO) instead using the hotline 13 28 66 to obtain the physical application sheets or employ the services of a verified Tax Agent who is capable of commencing with the procedure on the client’s behalf.
What about a Tax File Number (TFN)?
Apart from the ABN, you should get a Tax File Number (TFN) so that you can include the profits from the business in your personal tax forms.
What about a Business Name?
You should carefully consider the name of the business. If you plan on using your own name as is, it does not need to be registered. But if they any other words before or after the name, or if you decide to use an invented word instead, you will need to register for your business name. This allows you to later on file for copyright and other protective measures to protect your brand from being misused by other companies.
Starting a business is an exciting chapter of a new journey. To ensure that you setup correctly and get a head start in your business, contact Femia Accountants today on 9316 4500 or book a time to meet with us.