Starting a Side Hustle in Australia? Why You Need an ABN and How to Save Tax as a 'Sole Trader'
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| Starting a Side Hustle in Australia? |
In 2026, relying on a single salary is risky. That's why millions of Aussies have a "side hustle"—driving for Uber, doing graphic design, or selling handmade goods online.
If you are making money outside of your regular PAYG job, the first question is: "Do I need an ABN?"
The answer is usually YES. And if you don't have one, other businesses might withhold 47% of your payment for tax. Here is your guide to navigating the Sole Trader world.
Hobby vs. Business: The ATO Test
First, check if you are running a business or just a hobby.
- Hobby: You sell a few paintings to friends just for fun or to recover costs. No ABN needed.
- Business: You intend to make a profit, you advertise your services, and you operate in a "business-like manner" (e.g., Uber, Upwork, Tradie work). You NEED an ABN.
Why You Want an ABN (The 47% Threat)
Getting an ABN (Australian Business Number) is free and takes 10 minutes on the Australian Business Register website.
If you do work for another business (B2B) and invoice them $1,000, but you don't provide an ABN, they are legally required to withhold 47% ($470) (top tax rate + Medicare levy) and send it to the ATO. You only get $530. With an ABN, you receive the full $1,000.
⚠️ Critical Warning: The GST Trap (Uber Drivers Read This)
Many new Sole Traders get confused about GST (Goods and Services Tax).
- General Rule: You only need to register for GST if your business turnover exceeds $75,000 per year.
- The Uber/Rideshare Exception: If you drive for a rideshare/taxi service, you MUST register for GST from the very first dollar you earn. There is no $75k threshold. If you fail to do this, the penalties are severe.
Tax Deductions: The Secret Weapon
As a Sole Trader, you pay tax on your Profit (Income minus Expenses), not your Revenue.
This means you can claim deductions for things you use to earn that money. This is how you lower your tax bill.
📝 Common Deductions
- Vehicle Expenses: If you drive for work (not commuting), you can claim using the "cents per km" method or keep a Logbook for 12 weeks.
- Home Office: If you work from home, you can use the Fixed Rate Method (67 cents per hour) to cover electricity, internet, and phone usage.
- Equipment: Laptops, tools, or phones (often instantly deductible under "Instant Asset Write-Off" rules for small businesses).
- Software: Xero, Canva, or website hosting fees.
The PSI Rule (Personal Services Income)
Warning: If you are an IT contractor or consultant and 100% of your income comes from one client, the ATO might treat you as an "employee" for tax purposes under PSI rules. This stops you from claiming certain deductions. Always check this with an accountant.
Start Your Business Journey Today
Don't be scared of the paperwork.
Operating as a Sole Trader is the simplest way to start a business in Australia. Get your free ABN, open a separate bank account for your business income to keep things clean, and start keeping receipts for everything you buy. Those receipts are as good as cash at tax time.
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