Sole trader
The simplest business structure — you and the business are one.
A sole trader is the simplest way to run a business: you trade under your own name or a business name using your personal Tax File Number and an ABN. Business income is your income, taxed at your marginal rate, and you report it in your personal return. It’s cheap to set up, though you’re personally responsible for the business’s debts.
As a sole trader you generally lodge one tax return, can register for GST when turnover hits $75,000, and can claim work-related expenses as deductions.
Worked example
You earn $90,000 from clients and have $15,000 of deductible business expenses. You’re taxed on the $75,000 profit at your personal marginal rates — there’s no separate company rate, and the business doesn’t lodge its own return.
Common mistake
Thinking the business is a separate legal person. It isn’t — business debts are your debts, and business profit is your income.
Grounded in ATO guidance. Figures last checked . General information, not tax advice.
Related terms
ABN (Australian Business Number)
The 11-digit number that identifies your business.
Sole trader tax rate
There isn’t one — you’re taxed at personal marginal rates.
Personal services income (PSI)
Income that’s mainly from your skills, not a real business.
TFN (Tax File Number)
Your personal reference number in the tax system.
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