Starting a business in Australia comes down to a handful of decisions and a handful of registrations: choose a structure, get an ABN, register a business name if you are not trading under your own, and work out whether GST applies to you. An ABN is free and a sole trader can be trading legally the same afternoon. The steps below are in the order they actually depend on each other — you need an ABN before you can register a business name, and before you can register for GST.

Step 1 — Check that you are in business, not running a hobby

This matters more than it sounds. If what you are doing is a hobby, you do not declare the income and you cannot claim the expenses. If it is a business, you must declare every dollar from the first one — there is no tax-free run-up period for business income.

The ATO does not use a dollar threshold to decide. It looks at the whole picture: whether you intend to make a profit, whether the activity is repeated and regular, whether it is run in a business-like way with records and planning, its size and scale, and whether it looks commercial compared with others in the same field. Selling a few things you made over a summer is a hobby. Advertising, quoting and invoicing for the same work every week is a business.

Step 2 — Choose a business structure

There are four common structures in Australia: sole trader, partnership, company and trust. Almost everyone starting alone begins as a sole trader, because it is free, immediate, and the tax is just your normal income tax return with a business schedule attached. A partnership is the equivalent when two or more people go in together. A company is a separate legal entity that costs money to register and maintain, and a trust is more complex again.

The choice affects your legal liability, how the profit is taxed, and how much paperwork you carry each year — so it is worth ten minutes rather than a coin toss. Compare the four structures side by side before you register anything, because changing later means new registrations and possibly a capital gains event.

Step 3 — Apply for an ABN

An Australian Business Number identifies your business to the ATO, to other businesses and to your clients. Applying is free through the Australian Business Register, and if your identity details check out cleanly the number can be issued on the spot. Applications that need manual review take longer.

You need an ABN to put on your invoices. Without one, a business paying you generally has to withhold tax at the top rate from the payment and send it to the ATO — you eventually get it back at tax time, but it is a brutal thing to discover on your first invoice. How to get an ABN walks through the application and what to have ready.

Step 4 — Register a business name if you need one

You only need to register a business name if you trade under something other than your own legal name. Jane Chen operating as "Jane Chen" needs nothing. Jane Chen operating as "Northside Electrical" must register that name with ASIC.

Registration is done through ASIC Connect, needs your ABN first, and carries a fee for either one year or three years. ASIC indexes those fees, so check the current amount on asic.gov.au rather than trusting a figure in an article. Two things people routinely get wrong:

  • A registered business name is not a trade mark. It stops nobody from using a similar name. If the name matters commercially, that is a separate application to IP Australia.
  • Registering a name does not create a company. You are still a sole trader with a trading name — the liability position is unchanged.

Step 5 — Work out whether you need to register for GST

GST registration is compulsory once your GST turnover hits $75,000 in any rolling twelve-month period, or as soon as you expect it will. It is not tied to the financial year, and rideshare and taxi drivers must register from their first fare regardless of turnover.

Below the threshold it is your call, and it is a real trade-off: you can claim back the GST on your tools and materials, but you add 10% to your prices and you start lodging a BAS every quarter. Whether to register for GST covers both sides of that decision.

Step 6 — Open a separate bank account

A company must have its own account. A sole trader is not legally required to, and should anyway. One mixed account means that at tax time you are picking business expenses out of a year of groceries and petrol, and every hour of that is either your evening or your accountant's invoice.

A second everyday account in your own name is enough to start. It costs nothing at most banks and it is the single highest-return thing on this list for the effort involved.

Step 7 — Sort out insurance

What you need depends entirely on the work, and some of it is not optional:

  • Workers compensation is compulsory in every state and territory the moment you employ someone. The scheme and the regulator differ by state.
  • Public liability covers injury or damage you cause to others. Most commercial clients and most sites will not let you start without it, and some occupational licences require it.
  • Professional indemnity covers advice or services that turn out to be wrong. Standard for consultants, designers, bookkeepers and anyone giving professional opinions.
  • Income protection covers you, which nothing else on this list does. A sole trader has no sick leave.

Step 8 — Price the work properly

The most common mistake in a first year is converting an old salary into an hourly rate by dividing by 38 hours. That rate ignores unpaid administration, holidays, sick days, your own superannuation, insurance, tools, software and the weeks with no work in them.

Work backwards instead: decide the income you need, add your real costs, then divide by the hours you can genuinely bill — which for most solo operators is closer to half the week than all of it. The hourly rate calculator does that arithmetic.

Step 9 — Set up your records on day one

You must keep records that explain your transactions, in English, for five years from when you prepared or obtained them — or from when the transaction was completed, whichever is later. That covers invoices you issued, receipts for what you bought, bank statements and any working papers behind a claim.

Doing this from the first invoice costs nothing. Reconstructing it in June from a shoebox costs a weekend, and the deductions you cannot substantiate you simply do not get. Balaana's free plan handles invoices, expenses and GST tracking, which is the whole of what a new sole trader needs.

Step 10 — Put tax money aside from the first payment

Nobody withholds tax from a sole trader's income. The first tax bill therefore arrives as one number, after a year of spending money that was never entirely yours. Move a percentage of every payment into a second account the day it lands and treat that account as untouchable.

How much depends on your total income for the year and your deductions, so there is no single right figure — a registered tax agent can size it for your situation. If you are also registered for GST, the GST you collect belongs in that account too, because you are holding it for the ATO. Once your tax bill reaches a certain size the ATO will move you onto quarterly PAYG instalments, which spreads it out and is much easier to live with.

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Frequently asked questions

As a sole trader trading under your own name, the registrations themselves are free — an ABN costs nothing and so does registering for GST. The costs that do apply are a business name registration with ASIC if you trade under a different name, insurance appropriate to your work, and company registration if you choose that structure instead.

If you are carrying on an enterprise in Australia, yes in practice. Without an ABN on your invoices, a business paying you generally has to withhold tax at the top rate and remit it to the ATO. An ABN is free and most applications are decided immediately.

Most people starting alone begin as a sole trader because it is free, immediate and simple to run. A company makes sense when liability exposure is real, when clients require it, or when profits are large enough that the flat company tax rate beats your marginal rate. You can incorporate later, though it means new registrations.

There is no threshold. If you are in business, every dollar of business income is declared from the first one. The tax-free threshold applies to your total taxable income when your return is assessed, not to whether the income needs reporting.

Only if your GST turnover reaches $75,000 in a rolling twelve-month period, or you expect it to. Rideshare and taxi drivers must register immediately regardless of turnover. Below the threshold registration is optional and worth weighing rather than doing by default.

Sources

Registration requirements and record-keeping rules in this article come from the Australian Taxation Office, the Australian Business Register and ASIC. Fees and thresholds change — confirm the current position at ato.gov.au, abr.gov.au and asic.gov.au, or with a registered tax agent. Balaana is bookkeeping software, not a tax agent — this article is general information, not personal tax or legal advice.