Do I Need an Accountant as a Sole Trader?

What every sole trader has to do

As a sole trader, you and the business are the same taxpayer. Business profit is taxed as your personal income, so you lodge one individual return and include all business income in the business and professional items schedule, even money you move into your personal account.

The obligations grow as the business grows. A small side business may only need good records and the extra schedule. Once turnover rises, GST, BAS and PAYG instalments follow.

• Get an ABN, which you need before you can register for GST
• Report all business income in the business and professional items schedule
• Register for GST once your GST turnover reaches $75,000
• Pay PAYG instalments if the ATO enters you
• Keep business records for at least 5 years
• Check whether the personal services income rules apply to you

GST and BAS

You must register for GST within 21 days of your GST turnover reaching $75,000. The ATO measures this two ways: current turnover (this month plus the previous 11) and projected turnover (this month plus the next 11). If either reaches $75,000, you need to register. Taxi, limousine and ride-sourcing drivers must register regardless of turnover.

Worked example: you start invoicing $6,500 a month. Projected over this month and the next 11, that is $6,500 x 12 = $78,000, which is over $75,000. You have 21 days to register, and from then on you charge GST and lodge BAS.

You can register voluntarily below the threshold, for example to claim GST credits on start-up costs. Once registered, you generally have to stay registered for at least 12 months.

PAYG instalments: paying tax during the year

Employees have tax taken out of each pay. Sole traders do not, so the ATO uses PAYG instalments to collect tax on business income during the year. You are entered automatically when your latest return shows instalment income of $4,000 or more, your latest assessment shows tax payable of $1,000 or more, and your notional tax is $500 or more.

Many new sole traders are caught by their first year: no instalments were paid, so the first assessment brings a full year's tax at once, and instalments for the next year start straight away. You can ask to enter PAYG instalments voluntarily through myGov, a registered tax agent or by phoning the ATO on 13 28 61.

Personal services income rules

If most of your income is a reward for your personal skills or effort, such as consulting, IT contracting or many trades working for one main client, the personal services income (PSI) rules may apply. They do not stop you earning the income, but they limit some deductions, including home occupancy costs such as rent and mortgage interest.

The rules do not apply if you are a personal services business. You can self-assess as one if you meet the results test for at least 75 per cent of your PSI, or if you meet the unrelated clients, employment or business premises test and less than 80 per cent of your PSI comes from one client and its associates. If you cannot self-assess, you may be able to apply to the ATO for a determination.

Records, concessions and what the ATO pre-fills

Keep records for at least 5 years to show your business earned the income and incurred the expenses. The ATO now pre-fills more for sole traders, including your ABN, opening stock and payments reported by businesses that lodge taxable payments annual reports. Most of that data is available after 28 August, and you still have to check it before you lodge.

Businesses with aggregated turnover under $10 million can immediately write off eligible assets costing less than $20,000 each, a threshold made permanent from 1 July 2026. The small business income tax offset can reduce your tax by up to $1,000 a year. For 2025-26, the car cents per kilometre rate is 88 cents. General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible.

When an accountant is worth it

A sole trader with low turnover, simple expenses and good records can manage alone. An accountant usually earns the fee when one of the triggers below applies, because the cost of getting GST, instalments or PSI wrong is higher than the fee. A registered agent also gives you later lodgment dates, and their fee is deductible.

Acquire Strategic Accounting provides registered tax agent services to sole traders and small businesses from Victoria Point and Jimboomba, and is a Xero Platinum Partner.

• Your turnover is approaching $75,000
• You are lodging BAS or paying PAYG instalments
• Most of your income comes from one client
• You are buying vehicles, tools or equipment
• You are behind on lodgments
• You are wondering whether a company or trust would suit you better