Read on for useful tips relevant for Sole Traders in operating in the inner west of Melbourne. We specialise is helping small businesses in inner west suburbs such as Mariibyrnong, Ascot Vale and West Footscray with services including business advice, small business tax returns & BAS and cloud accounting software.
1. A business that is owned by 1 person. Also referred to as ‘sole proprietorship’
2. Business income is declared as your individual income within your individual tax return (no separate tax return is needed).
3. Sole trader usually pays the same tax as individual taxpayers, at personal income tax rates (refer Budget 2015 update below)
4. Sole traders cannot claim deductions for money 'drawn' from the business. Amounts taken from the business are not wages for tax purposes, even if you think of them as wages.
5. If a sole trader’s business trades in a name other than the persons own legal name the business owner must register the business name with ASIC
6. As a sole trader, you are personally liable for debts the business incurs (there are no limits on this liability). The structure is inexpensive to set up because there are few legal and tax formalities.
7. Common alternate business structures are partnership, company & trust
8. Regardless of what business structure you use you should have separate bank accounts to separate your business transactions from non-business (personal) transactions
NOTE: The 2015 Budget announced a 5% Income Tax Offset for unincorporated business such as a Sole Trader. From July 1 2015, individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for this small business tax discount. This discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset through their end-of-year tax return.
For further assistance with a Sole Trader Business (or any other business), contact us to arrange a meeting with Duncan Warnock CPA from the Warnock Accounting Maribyrnong office.