What is a Sole Trader?
- jcraigmckay
- Sep 30, 2025
- 3 min read
A sole trader is the simplest way to run a business in Australia: one individual owns and controls the business and is legally responsible for its debts and decisions. It’s low-cost and quick to set up, but there’s no limited liability—the buck stops with you.
Separate legal entity?
No. Unlike a company, a sole trader and the individual are the same legal person. That simplicity is handy, but it also means personal assets are on the line if things go wrong.
Getting started (Adelaide and beyond)
Apply for an ABN. You’ll need an Australian Business Number to invoice and (if required) register for GST.
Choose a trading name (optional). If you trade under your own first name and surname, you don’t need to register a business name. If you use anything else, register that name with ASIC.
GST decision. Registration is compulsory when your GST turnover meets or is likely to meet the $75,000 threshold in a 12-month period. Register within 21 days once required.
Business bank account. Not legally required, but strongly recommended to keep records clean and cash-flow visible.
Licences & insurance. Depending on industry, consider public liability, professional indemnity, and any occupational licences.
Taxes & reporting
Income tax. You lodge an individual tax return with a business schedule; the business’s profit is taxed at your marginal rates.
GST & BAS. If you register for GST, you’ll issue tax invoices and lodge BAS (usually quarterly; sometimes monthly).
PSI (Personal Services Income). If most of your income is a reward for your personal efforts/skills, the PSI rules may limit certain deductions and “look through” to you personally. This commonly affects contractors who mainly have one client. Get advice early.
Hiring staff as a sole trader
Yes—sole traders can employ people. When you do, you take on employer obligations:
Superannuation (SG). You must pay at least the legislated Super Guarantee— 12% from 1 July 2025.
Work injury insurance. In SA, most employers must register with ReturnToWorkSA for work injury insurance.
Work health & safety (WHS). As a PCBU, you have a primary duty of care to ensure, so far as reasonably practicable, the health and safety of workers and others. SafeWork SA provides guidance and advisory visits for small businesses.
Tip: Even if you have no employees, WHS still matters (contractors, visitors, volunteers). Document basic risk controls and safe work procedures.
Pros and cons at a glance
Advantages
Simple setup and low cost
Full control over decisions
Fewer ongoing formalities than a company
Risks/Limitations
Unlimited personal liability
Profit taxed at personal rates (no company tax rate)
Harder to bring in investors or share ownership
Potential PSI restrictions for single-client contractors
Do I need a business name?
Only if you trade under something other than your personal name. Otherwise, no business-name registration is needed. If you do need one, register nationally through ASIC.
When should I switch to a company?
Consider a company if you’re taking on higher risk, hiring more staff, needing outside investment, planning for sale, or wanting clearer separation of business assets and personal assets. An accountant/lawyer can model tax, asset-protection, and exit outcomes before you change structure.
FAQs
Is a sole trader allowed to have employees?
Yes. You’ll then have SG, PAYG withholding, WHS and SA work-injury insurance obligations.
Do I have to register for GST?
Only when your GST turnover hits or is likely to hit $75,000, or if you provide certain services (e.g., ride-sourcing). Register within 21 days once required.
How do I pay myself?
You usually take drawings (not a salary). You still pay income tax via your individual return, and may need PAYG instalments.
What records do I need?
Keep invoices/receipts, bank statements, payroll records (if employing), asset registers, and WHS documents. The ATO recommends robust digital record-keeping.
Thinking about starting—or switching to—a sole trader structure in SA? We advise Adelaide sole traders on setup, contracts and risk. Call Craig McKay Legal on (08) 8331 3204 or take advantage of our complimentary no-obligation telephone consult on any new matter.
This article is for general information only and is not a substitute for legal advice. For advice specific to your situation, please contact our office.
