Switchboard Finance Logo – Sole Trader Glossary

Sole Trader

A Sole Trader is an individual who owns and operates a business under their own name or ABN. Lenders assess sole traders by reviewing personal income, tax returns, bank statements, GST turnover, and overall financial stability when applying for Business Loans, Working Capital Loans, and Low Doc Asset Finance. Related terms: Net Income, PAYG, Revenue, Tax Deduction.

Why Sole Trader Status Matters

Lenders treat sole traders differently from companies because business income and personal income are legally the same. This affects borrowing power, tax obligations, and eligibility for finance products.

  • Income is assessed from personal tax returns
  • Personal liabilities impact serviceability
  • May qualify for low doc lending options
  • Often simpler structure for startups and trades
  • Cashflow and GST reporting influence approvals

Common Features of Sole Trader Businesses

  • Single owner with full financial responsibility
  • Uses personal TFN and a business ABN
  • Simplified tax reporting
  • Low setup and operating costs
  • Eligible for a wide range of business finance

Sole traders often use working capital loans and invoice finance to manage cashflow gaps caused by slow-paying clients.

Official reference: business.gov.au

Do sole traders need a business bank account?
It’s not legally required but strongly recommended for clean bookkeeping and finance assessments.
Can sole traders get business loans?
Yes — lenders frequently fund sole traders using tax returns, bank statements, or low doc options.
Do sole traders need to register for GST?
Only if annual turnover exceeds $75,000 or if they choose to voluntarily register.
Are sole traders personally liable for business debts?
Yes — the owner is legally responsible for all debts and obligations.
Do sole traders pay themselves a salary?
No — they draw profits directly from the business instead of receiving wages.