Australia Starting a Business Guide
starting a business in Australia. The guide covers: the business structures — the four main business structures in Australia are: (a) the sole trader (the "sole trader") — the simplest structure; the individual operates the business under their own name or the registered business name; the individual is personally liable for the debts; the individual reports the business income in their personal tax return (the "individual tax return" — the "supplementary section" of the form 2025); the individual pays the PAYG instalments quarterly; the sole trader is subject to the personal marginal tax rates (16% to 45% plus the 2% Medicare levy), (b) the partnership (the "partnership") — the partners share the profits and the losses according to the partnership agreement; the partnership files the partnership tax return (the "partnership tax return" — the form "Partnership Tax Return 2025") but does NOT pay the tax; each partner pays the tax on their share of the partnership income at the personal marginal rates, (c) the company (the "proprietary limited company" — the "Pty Ltd") — the company is a separate legal entity; the shareholders have the limited liability; the company pays the corporate tax (25% for the base rate entities, 30% for the other companies); the company files the company tax return (the "Company Tax Return 2025"); the company can distribute the profits as the franked dividends, (d) the trust (the "trust" — the "discretionary trust" or the "unit trust" or the "hybrid trust") — the trustee holds the assets for the beneficiaries; the trust files the trust tax return (the "Trust Tax Return 2025"); the beneficiaries pay the tax on the trust distributions at the personal marginal rates; the trust can distribute the income to the beneficiaries with the lower tax rates (the "income streaming" or the "trust distribution"); the ABN (the "Australian Business Number") — the ABN is the unique 11-digit identifier for the business; the ABN registration is required for the GST registration, the PAYG withholding, and the fuel tax credits; the ABN is registered through the Australian Business Register (the "ABR") — www.abr.gov.au; the sole traders use the TFN as the ABN (the "ABN entitlement" — the individual must have the "ABN entitlement" to register for the ABN); the TFN (the "Tax File Number") — the TFN is the 9-digit number issued by the ATO; the individual must apply for the TFN if they do not have one; the company must apply for the company TFN (the "company TFN") upon the incorporation; the trust must apply for the trust TFN; the PAYG withholding (the "Pay As You Go withholding") — the employer must withhold the PAYG tax from the payments to the employees (the "PAYG withholding"); the employer must register for the PAYG withholding with the ATO; the employer must provide the "payment summary" (the "income statement" — formerly the "group certificate") to the employees by the 14 July of each year; the employer must lodge the "PAYG withholding report" (the "Taxable Payments Annual Report" — the "TPAR") if the business is in the construction, the cleaning, the courier, the security, the information technology, or the road freight industry; the Business Activity Statement (BAS) — the BAS is the form used to report and pay the GST, the PAYG instalments, the PAYG withholding, and the FBT instalments; the BAS is lodged monthly, quarterly, or annually; the BAS must be lodged by the 21st day of the month after the end of the tax period (the 28th for the quarterly lodgers using the online lodgement); the employer obligations — the employer must: (a) register for the PAYG withholding, (b) register for the payroll tax (the state-based payroll tax — the threshold varies by the state: the general threshold is $1.2 million annual wages in NSW, $1.3 million in VIC, $1.3 million in QLD), (c) pay the superannuation guarantee (the "SG" at 11.5% of the ordinary time earnings), (d) provide the workers' compensation insurance (the "workers' compensation" — the state-based insurance), (e) provide the long service leave (the "long service leave" — the state-based entitlement), (f) provide the annual leave (the "annual leave" — 4 weeks per year for the full-time employees), (g) provide the personal leave (the "personal/carer's leave" — 10 days per year); the Personal Services Income (PSI) rules — the PSI rules apply to the individuals who provide the services through the company, the trust, or the partnership (the "PSI entity"); the PSI is the income that is mainly a reward for the personal efforts or the skills of the individual; the PSI rules require the PSI entity to distribute the income to the individual (the "PSI allocation") and may disallow the deductions that are not related to the generation of the PSI; the PSI rules prevent the individual from splitting the income through the company or the trust. All amounts in Australian Dollars (AUD). For related reading, see our Corporate Tax Guide → and GST Guide →.
Business Structure Comparison
- Sole Trader: Simple to set up (ABN only). The individual reports the business income in the personal tax return. The personal assets are at risk (unlimited liability). The individual pays the PAYG instalments quarterly. The income is taxed at the marginal rates (16% to 45% + 2% Medicare levy). The sole trader can claim the "sole trader deductions" (the "work-related expenses").
- Partnership: The partners share the profits and the losses. The partnership does NOT pay the tax. Each partner pays the tax at the personal marginal rate. The partnership must have the partnership agreement (the "partnership agreement"). The partnership must file the partnership tax return (the "Partnership Tax Return 2025") by 15 May 2026.
- Company (Pty Ltd): The company is a separate legal entity. The shareholders have the limited liability. The company pays the corporate tax (25% or 30%). The company can distribute the franked dividends. The company must hold the director's meetings and the annual general meeting (the "AGM"). The company must appoint the "public officer" (the "public officer" — the person responsible for the tax compliance).
- Trust (Discretionary): The trustee has the discretion to distribute the income to the beneficiaries. The trust can stream the income to the beneficiaries with the lower tax rates. The trust must have the "trust deed" (the "trust deed"). The trust must file the trust tax return (the "Trust Tax Return 2025"). The trust is subject to the "trust loss" rules and the "trust streaming" rules.
For the GST registration and the BAS lodgement, see our GST Guide →.
ABN Registration Steps
- Check eligibility: The individual must have the "ABN entitlement" — the individual must be carrying on an "enterprise" (the "enterprise" — the activity conducted in the form of the business, the trade, the profession, the hobby, the investment, or the rental property). The ATO may cancel the ABN if the entity is not carrying on the enterprise.
- Apply online: The ABN is registered through the Australian Business Register (the "ABR") at www.abr.gov.au. The application is free. The ABN is issued immediately for the most applicants. The ABN registration is required for the GST registration, the PAYG withholding, and the fuel tax credits.
For the PAYG withholding and the employer obligations, see our Personal Tax Guide →.