A sole trader in Australia is one person running a business in their own name, the simplest and usually cheapest structure to set up. You use your individual tax file number, register for a free ABN, and pay tax on business profit at personal rates. You're personally liable for all debts, so your own assets are at risk.
business.gov.au calls it the simplest business structure, relatively easy and inexpensive to set up. The trade-off is liability and tax flexibility. Here's what business.gov.au and the ATO say, with the figures as of October 2026.
Sole trader at a glance
| Question | Answer for a sole trader |
|---|---|
| Tax return | Your individual return, using your own TFN |
| ABN | Free to register through the Australian Business Register |
| Liability | Unlimited: all your personal assets are at risk |
| Records | Keep financial records for at least 5 years |
| Separate bank account | Not required, but recommended |
| Splitting profit with family | Not allowed |
| Employing staff | Allowed, with super and workers' compensation obligations |
| Super for yourself | Optional |
Getting an ABN
An ABN is an 11-digit number that identifies your business to government, other businesses and the public. It doesn't replace your TFN. Registering is free through the Australian Business Register, which the ATO manages, but you're only entitled to one if you're running a business or enterprise.
- Check you're entitled to an ABN on the ABR website.
- Gather your business details, activities and associates before you start.
- Apply online. If everything's complete, you'll find out your ABN as soon as you finish.
- If the application needs review, you get a reference number, and reviews can take 20 business days.
- If it's refused, you get a refusal number and a letter with the reason within 14 days.
- Keep it up to date: you have 28 days after becoming aware of a change to update your details.
Having an ABN also helps you avoid PAYG tax being withheld from payments you receive, and it lets you verify your business when invoicing. If you trade under anything other than your own name, you'll also need to register a business name.
When your ABN details change
Anyone can use ABN Lookup to see the publicly available details registered against an ABN, so keeping them current matters. If you change your business structure, for example from sole trader to a company, you may need to apply for a new ABN and cancel the old one. If your business name details change, you may also need to update them with the Australian Securities and Investments Commission (ASIC). For questions about an application in progress, you can contact the ABR.
How a sole trader is taxed
Business profit is added to any other income and taxed at individual rates. The ATO's resident rates for 2026-27, which don't include the 2% Medicare levy:
| Taxable income | Tax on this income (2026-27) |
|---|---|
| 0 to $18,200 | Nil |
| $18,201 to $45,000 | 15c for each $1 over $18,200 |
| $45,001 to $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 to $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
This is the detail people miss. The first bracket rate drops from 16c in 2025-26 to 15c in 2026-27, and because you can't split profit with a partner or family members as a sole trader, every dollar lands on your own rates. That's usually the point when people look at a company or trust, so get advice once profits climb into the higher brackets.
GST: the $75,000 line
You must register for GST when your GST turnover, which is gross income from all your businesses minus GST, reaches $75,000 or more, or when you start a business expecting to reach that in the first year, as of October 2026. Once you're required to register, you have 21 days to do it, and penalties can apply if you don't. You need an ABN first, and you only register once even if you run more than one business.
Liability: the real trade-off
business.gov.au is direct about it: as a sole trader you're legally responsible for every part of the business, including debts and losses, and all your personal assets are at risk if things go wrong. You also make the day-to-day decisions alone, which is part of the appeal. If your work carries real risk of claims, insurance matters more for a sole trader than for a company.
Super and staff
You don't have to pay super into a fund for yourself, though it's a good idea for retirement, and my guide to super for sole traders covers the options. If you hire, you take on employer obligations, including workers' compensation insurance and super for your staff.
My verdict
Being a sole trader is the right start for most one-person Australian businesses: a free ABN, one tax return and full control. Keep 5 years of records, watch the $75,000 GST line, and once your profit or your risk grows, revisit the structure rather than staying a sole trader by default.
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Frequently asked questions
How do I become a sole trader in Australia?
Check you're running a business, then register for a free ABN through the Australian Business Register. You lodge tax using your individual tax file number.
Do sole traders need an ABN in Australia?
If you're running a business, you're entitled to one, and it's free. It helps you avoid PAYG tax being withheld from payments and verifies your business on invoices.
When does a sole trader have to register for GST?
When GST turnover reaches $75,000 or more, or you expect it to in your first year. You must register within 21 days of being required to.
Is a sole trader personally liable in Australia?
Yes. Sole traders have unlimited liability, and all personal assets are at risk if things go wrong.
Do sole traders have to pay themselves super?
No. It's optional for yourself, but you must meet super obligations for any employees.
How long must a sole trader keep records?
At least 5 years.
Can a sole trader employ staff in Australia?
Yes. You can employ people as a sole trader, but you must meet obligations such as workers' compensation insurance and superannuation contributions.
Is the ABN the same as my tax file number?
No. An ABN identifies your business and doesn't replace your TFN, which you keep using for your individual tax return.
