A sole trader is the simplest form of business structure. It is also relatively easy and inexpensive to start and maintain.
There is no division between business assets or personal assets, which includes your share of any assets jointly owned with another person (such as your house or car). Your liability is unlimited which means that personal assets can be used to pay business debts. Sole traders are taxed as individuals and pay income tax at personal tax rates.
This means your business income is declared on your personal tax return along with any other assessable income (such as your salary or wages, interest, dividends).
Provided that certain conditions are met, predominantly turnover less than $2 million, a sole trader may be classified as a small business entity and may be entitled to a number of concessions which include:
- simplified tax depreciation rules and write-offs for small items of capital expenditure;
- simplified trading stock valuation rules
- upfront deduction on certain prepayments
- tax assessment amendment period reduced to two years
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All representations and information on this site is general in nature and should not be relied upon as advice. If you require specific advice please contact us.