Understanding ABNs and Business Structures as a Sole Trader
Disclaimer: This blog provides general information and opinion only and is not personal legal advice. Clinicians should seek independent professional or legal advice for their specific personal circumstances.
If you want to start out as an independent business in Australia, one of the first steps is understanding how an Australian Business Number (ABN) works and how it relates to your business structure and taxes.
What is an ABN?
An ABN is an 11-digit identifier that lets the government, clients, and suppliers know you're operating a legitimate business. For sole traders, it's the foundation for invoicing clients, registering a business name, and accessing tax benefits.
Registering for an ABN is free, and there are many scam companies out there that will offer to register an ABN for you for a fee – don't fall for this! You can register for an ABN through the ABR website in a matter of minutes.
If you don't have an ABN, businesses paying for your products or services may be required to withhold a large portion of your payment (up to 47%!) and send it to the ATO as tax on your behalf.
Business Structure
Choosing the right business structure is a key decision for allied health practitioners going independent. Most clinicians starting out choose to operate as sole traders because it is simple, low-cost, and gives them direct control over their income and day-to-day business decisions. This structure also involves straightforward accounting and minimal regulatory compliance, making it ideal for practitioners transitioning into independent practice.
The alternative is a Pty Ltd company (private limited company), which can offer advantages such as limited liability, potential tax planning benefits, easier access to funding, and the ability to bring in shareholders. However, companies come with higher setup and ongoing costs, more complex tax obligations, and stricter regulatory requirements.
Should I register for GST?
For both sole traders and companies, understanding GST (Goods and Services Tax) is critical. If your business expects to earn $75,000 or more annually, you must register for GST. This allows you to charge GST on invoices (where applicable), claim GST credits on purchases, and lodge regular Business Activity Statements (BAS) with the ATO. Even if you earn less, some sole traders register voluntarily to improve professionalism and simplify transactions.
Setting up an ABN, choosing the right structure, and knowing your GST obligations ensures that your business is compliant, efficient, and ready to grow.
Disclaimer: This blog provides general information and opinion only and is not personal legal advice.