Sole traders are a unique structure in the way they assimilate with both SME’s and Individual clientele (not carrying on a business). In order to provide the very best advice for Sole Traders, an intimate knowledge of both SME’s and individual clientele is required.
The key to maximising a Sole Trader business is not only to advise the business in the same manner as an SME but also to advise using a wholistic approach to the individual in order to minimise tax from employment income, as well as maximise the profits/minimising the tax of the business. With the vast majority of Sole Traders being in the growth phase of their business, a strong emphasis should be placed not only on tax reductions but also implementing a plan in order to grow and prosper.
In legal terms, a sole trader is simply an extension of oneself and not a separate legal entity, this has administrational advantages as the business income is reported on ones personal tax return. It also allows more flexibility with certain assets as transferring titles between the individual and the business need not occur should circumstances regarding the usage of the asset change.
Unlike companies, the tax paid on sole trader income is calculated using the individuals marginal tax rate, and whilst a trust structure will almost always be best for taxation purposes, if the individuals income is less than $70k (not having a separate income) there is no advantage to running a company structure from a taxation perspective (however there will still be liability advantages)(please visit our Blog on entity structures for further advice).
With small sole traders, book keeping and compliance is a large distraction from running your business. By implementing a streamlined accounting solution (such as xero), your time can be better spent running your business as opposed to menial compliance work. Accountancy matters specializes in xero and teaching our clients the most effective way to implement and use such a solution.
Our open door policy allows us to “hold our clients hands” and guide them through the process, providing our clientele with the tools and knowledge to become outstanding entrepreneurs.