Setting yourself up as a sole trader is not a complex task and usually doesn’t cost you anything - unless you use a third party. The first step you will need to complete to become a sole trader is registering for an Australian Business Number (ABN), a unique 11 digit number issued to all entities registered in the Australian Business Register (ABR).
Once you have an ABN, you can use it to start earning income from private jobs. However, being registered for an ABN doesn’t stop you from taking on work as an employee (PAYG) or a contractor if you want to or stop you from using a trading or business name. Being registered as an ABN sole trader also means you will only need to lodge a single tax return, the same as a PAYG employee. If you are considering what the best business structure for you is whether it’s being registered as an ABN sole trader or registering as a business (ACN), it’s worth taking a look quiz on whether you should register as a sole trader or a company here.
Do I need to get an ABN?
If you’re a sole trader making $75,000+ annually in self-employed income, you’re required to register for an ABN. (You also need to register for GST.)
But if you make less than $75k, you can still sign up for an ABN. And there are a few reasons you might want to do so.
Having an ABN means your business is easily identifiable – people might confuse your business with another similarly-named one, but they’re unlikely to confuse your ABN number. You also need an ABN if you intend to register your business name nationally, making it unavailable for other businesses.
More than that, technically, any business that’s paying you for your services may be required to withhold up to 47% of your payment for the ATO, as taxes on your behalf. But not if you have an ABN.
Setting up your ABN
To set up your Sole Trader ABN, you need to meet the following criteria: you are the only owner of the business and are legally responsible for all aspects of the business, including debts. This will not stop you from employing other workers, but you cannot employ yourself.
The application process is done through the Australian Business Register website, which is quick and painless if you have all the information to hand. We’ve put together a handy list below of what you’ll need. However, you may not have or need everything on this list as it may not be relevant to your business.
- Your Tax File Number
- If you use one, your tax or BAS agent’s registered agent number. Don’t worry if you don’t have an agent as many sole traders don’t.
- Professional Adviser number if you use the services of a professional adviser (again, not essential).
- Previously held ABN, if this is not your first rodeo.
- Australian company number (ACN) or Australian registered body number (ARBN). Companies and registrable organisations can register for an ACN or ARBN through the Australian Securities and Investments Commission (ASIC) - Again, not everyone has or needs this.
- The date your ABN is required. This one is essential and should be the date you expect to start any business activities (but it can’t be more than six months into the future).
- Entity legal name – appears on all official documents or legal papers. Many sole traders use their name.
- Authorised contacts. If you have a registered tax or BAS agent authorised to make changes or update information on your behalf, you may want to include them here.
- Business contact details including address, postal address, email address and phone number. Your email address must include your name and cannot start with prefixes such as ‘support@’, or ‘info@’.
- A description of your business activity. What does your business do?
- Business location. You must provide a physical location for your business. The only exception is where there may be a risk to the safety of people if you reveal a location (eg: a domestic violence refuge).
If you supply all the relevant information required, you’ll usually receive an online notification of your ABN immediately upon completing the ABN application.
And then you are off and running! Congratulations and good luck.