Structures
You and the business are the same legal person. That makes it the simplest structure to run and the easiest one to get quietly wrong.
What it is
A sole trader is not a separate entity. You trade under your own IRD numbertax file number, the profit is your income, and the business’s debts are your debts. There is nothing to incorporate and nothing to register beyond a GST number once you cross the thresholdan ABN, and GST once you cross the threshold.
That simplicity is the whole appeal, and it is also the trap. Because there is no company bank account forcing the split, business and personal money tend to run through the same account, and the year-end tidy-up becomes the job instead of the return.
The other thing people miss is that nobody is deducting tax for you. An employer does it invisibly, fortnight by fortnight. As a sole trader the money arrives whole, and the bill turns up later — usually bigger than expected, because the first year’s tax and the second year’s instalments can land in the same twelve months.
Typically Freelancers, contractors, tradies and anyone trading under their own name.
Every year
The obligations that come with this structure, in the order they tend to catch people out.
An IR3 — your individual return, with the business income in it. There is no separate business return to file.Your individual tax return, with a business schedule. There is no separate business return to file.
Registration is compulsory once turnover passes $60,000 in any twelve months, and optional below it. Most sole traders file every two months.Registration is compulsory once turnover passes $75,000 in any twelve months, and optional below it. Most sole traders lodge quarterly.
Once your tax bill gets past the threshold you move onto provisional tax — three instalments a year, based on what you earned last year or what you estimate you will earn this one.Once your bill gets past the threshold the ATO puts you on PAYG instalments, usually quarterly, based on your last assessment.
Invoiced separately from your tax, and based on the income in your return. They surprise people every single year.There is no employer paying super for you. Whether you contribute, and how much, is a decision you have to make on purpose.
Invoices out, receipts in, and a clean line between business and personal spending. Not because anyone enjoys it — because it is the difference between claiming a deduction and hoping for one.
Your return, your GST and your instalments are a known quantity. We run them on a fixed monthly fee, tell you what is coming before it arrives, and leave you to do the work you actually get paid for.
Claim my free yearSomething else
Plenty of people run more than one of these at once — a company and a trust, or a job and a rental. We handle the set, not the piece.
Founders, family businesses and anyone who has incorporated or is about to.
Read it →Two or more people in business together — trades, professional practices and couples running something jointly.
Read it →Family trusts holding a home, a rental, a business or investments.
Read it →Anyone with a rental — one property, a portfolio, or a holiday home let out part of the year.
Read it →Ten minutes to start. No credit card, and we will tell you if you are better off elsewhere.
Claim my free yearNZ and AU
Not sure which structure you are in, or whether it is still the right one? Ask.
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