What Is a Sole Trader? Business Setup, ABN & Tax Explained

If you’re planning to start your own business, becoming a sole trader is one of the simplest ways to get started. Whether you're freelancing, contracting, or running a side hustle, it's a flexible and low-cost structure that suits many Australians.

In this guide, we’ll cover:

• What is a sole trader
• Why it’s a popular business structure
• How to set up your sole trader business
• How to register your ABN and start operating legally

Looking to apply for an ABN right away? Get your ABN online with Register My ABN today!

What is a Sole Trader?

A sole trader is an individual who owns and runs their business. It’s the most straightforward business structure in Australia - you’re in control, you keep the profits, and you’re personally responsible for any business debts or obligations.

Typical sole traders include:

• Freelancers (writers, designers, marketers)
• Tradies (electricians, plumbers, carpenters, painters)
• Contractors, health workers and consultants
• Gig economy workers (delivery drivers, rideshare drivers)

As a sole trader, your ABN is linked to your personal tax. That means you’ll report both business income and expenses in your personal tax return.

Why Choose a Sole Trader Structure?

Many Australians start out as sole traders because it’s:

• Simple and affordable to set up
• Easy to manage without complex paperwork
• Flexible - you can operate under your own name or a business name
• Eligible for the tax-free threshold (unlike companies)
• Easy to change later if you grow and need to restructure

It’s a great first step if you’re just getting started or testing a business idea.

How to Set Up as a Sole Trader

Here’s what you’ll need to do:

1. Apply for an ABN (Australian Business Number)
2. Register a business name if you’re trading under anything other than your own personal name
3. Open a business bank account (optional but recommended for tracking expenses)
4. Consider business insurance (like public liability or professional indemnity)

Most sole traders need to apply for an ABN before they can invoice clients, promote their services, or register for GST. You can apply through the Australian Business Register (ABR) or a trusted registration platform like us.

How to Register Your ABN as a Sole Trader

There are two ways to get your ABN:

• Apply for free through the ABR - suitable if you’re confident navigating the government process and can wait up to 20 business days, if it needs to be reviewed
• Apply through Register My ABN - ideal if you want a fast and easy application ($45 incl. GST, fully tax-deductible)

We’ve made the process as fast and simple as possible. Most customers receive their ABN within minutes of completing the form.

Common Mistakes When Starting as a Sole Trader

Here are some common pitfalls to avoid:

• Forgetting to register an ABN before advertising or invoicing
• Using your personal bank account for business income and expenses
• Not keeping business receipts for tax time
• Skipping business insurance (even for small jobs)
• Missing GST registration if you earn over $75,000 per year

Getting these basics right can help your business run smoothly from day one.

Ready to become a sole trader?

Becoming a sole trader is one of the easiest ways to start a business in Australia. It’s low-cost, gives you full control, and you can get started in less than a day.

To begin operating legally, you’ll need to register for an ABN. Get one with Register My ABN for an ABN in less than 5 minutes for $45 incl. GST (fully tax-deductible).