Once you’re qualified, “just get an ABN and start contracting” gets thrown around a lot — by mates, by employers offering you contract work instead of a job, sometimes by both. It sounds simple, and in some ways the paperwork actually is simple. What’s less simple is understanding what you’re taking on: different tax obligations, no automatic sick leave or super, and the possibility of being offered “contracting” when what’s actually being described is a normal employment relationship dressed up to save someone else money.
This isn’t a guide telling you to go out on your own or stay employed — that’s a genuinely personal decision that depends on your trade, your finances and your risk tolerance. It’s a plain-English rundown of the basics so you’re not walking in blind.
This guide covers registering an ABN, the high-level difference between a sole trader and a company, the GST threshold, sham contracting warning signs, insurance basics, and quoting and invoicing fundamentals.
The short version (TL;DR)
- Registering an ABN is free through the official Australian Business Register (abr.gov.au) — some third-party websites charge a fee to “process” your application, so go direct.
- Most tradies starting out register as a sole trader rather than setting up a company — it’s simpler, but it means your personal and business finances (and liability) aren’t legally separated.
- You generally need to register for GST once your turnover reaches (or you expect it to reach) $75,000 a year, though you can register earlier voluntarily.
- Sham contracting is illegal — it’s when a business calls you a “contractor” but actually controls your work like an employee. Fair Work Ombudsman has clear warning signs and a free advice line.
- Public liability insurance and thinking through income protection are common starting points once you’re working for yourself, since you lose the automatic protections an employer usually provides.
- Quoting, invoicing and record-keeping become your job the moment you’re contracting — there’s no payroll department doing it for you anymore.
Registering an ABN (and avoiding the fake sites)
An Australian Business Number (ABN) is a unique identifier for your business, and applying for one directly through the Australian Business Register is free. There are third-party websites, often ranking well in search results, that will process an ABN application for you and charge a fee for doing so — it’s exactly the same free government form either way. State small business commissioners have specifically warned about this pattern with ABN and TFN look-alike sites, so double-check you’re on the actual abr.gov.au domain before entering any details or payment information.
Sole trader vs company: the high-level difference
Most tradies who start contracting begin as a sole trader — it’s the simplest structure, with fewer setup costs and less ongoing paperwork than a company. The trade-off is that as a sole trader, there’s no legal separation between you and your business: your personal assets can be at risk if something goes seriously wrong with the business, and your business income is taxed as your personal income.
A company is a separate legal entity, offering more protection for personal assets and different tax treatment, but with more setup cost and ongoing compliance (ASIC fees, separate tax returns). Whether it makes sense depends on the scale of the work, the risk involved, and your income — a case-by-case decision worth discussing with an accountant rather than deciding from a blog post, including this one.
The GST threshold
In Australia, you’re generally required to register for GST once your business’s annual turnover reaches, or you reasonably expect it to reach, $75,000. Below that threshold, registration is optional — some sole traders register anyway because it lets them claim GST credits on business purchases, while others stay unregistered to keep things simpler while turnover is low. Once registered, you need to charge GST on your invoices, lodge Business Activity Statements (BAS), and pass that GST on to the ATO — it’s not extra income, it’s money you’re collecting on the government’s behalf.
Sham contracting: what to watch for
Sham contracting is when a business tells a worker they’re an independent contractor when, based on how the work actually operates, they’re really an employee. The Fair Work Ombudsman lists several signs pointing toward an employment relationship rather than genuine contracting:
- You work under the direction and control of the business, rather than deciding how the job gets done.
- You don’t carry any real financial risk or responsibility for profit or loss on the work.
- The business supplies the tools and equipment you use, rather than you providing your own.
- You can’t delegate or subcontract the work to someone else.
- You work set hours and do essentially the same work as employees on the books.
This matters because misclassification can mean missing out on entitlements like minimum pay rates, leave and superannuation that you’d be owed as an employee. Fair Work Ombudsman can’t tell you definitively whether your specific arrangement is a sham, but their free Infoline can point you toward the right advice, and penalties for businesses found to have engaged in sham contracting are significant — reported as ranging up to $495,000 depending on the size of the business.
Insurance basics once you’re on your own
Public liability insurance covers you if your work causes injury to someone else or damage to their property — for a lot of trades it’s expected by clients and head contractors before they’ll engage you, and in some states it may be a licensing requirement. Income protection insurance is worth understanding too: as an employee you generally get sick leave and often default cover through your super fund, but as a sole trader, an injury that stops you working can directly stop your income, with nothing automatic filling the gap. Whether you need it, how much, and through what provider is a decision worth making with a licensed adviser rather than guessing.
Quoting and invoicing basics
Once you’re contracting, putting together clear, written quotes before starting a job, and proper invoices once it’s done, becomes your responsibility rather than something payroll handles. At minimum, invoices generally need your ABN, a description of the work, the amount charged, and GST clearly shown if you’re registered for it. Keeping basic records of income and expenses from day one — even a simple spreadsheet — makes tax time considerably less painful than trying to reconstruct a year’s worth of jobs from memory.
Frequently asked questions
Do I need an accountant to start as a sole trader?
It’s not a legal requirement to register an ABN or start invoicing, but most tradies find it genuinely useful to get at least an initial session with a registered tax agent or accountant, particularly around GST, deductions and structuring — the cost is often small compared to the mistakes it can help you avoid.
If I’m not registered for GST, can I still charge whatever I want on invoices?
You can set your own prices, but if you’re not registered for GST, you shouldn’t be charging GST on top of your invoices — that’s specifically tied to GST registration. Charging it without being registered can create problems with the ATO.
My boss wants to move me from employee to “contractor” doing the same job — is that allowed?
It depends entirely on whether the actual working arrangement genuinely reflects independent contracting or still looks like employment in substance. If the day-to-day reality doesn’t change — same hours, same tools, same direction — that’s a key sham contracting warning sign, and it’s worth getting advice from Fair Work Ombudsman or a union before agreeing to the switch.
What’s the real difference between staying a sole trader and setting up a company later?
Broadly, a company offers more separation between your personal assets and business liabilities, and different tax treatment, but comes with more ongoing compliance and cost. Many tradies start as sole traders and consider switching to a company structure later as the business grows — it’s worth revisiting the question with an accountant as your situation changes, rather than deciding once and never reviewing it.
This guide is general information only — not financial, legal or health advice. Everyone’s situation is different. Use the official services and sources linked above, or talk to a qualified professional. Information correct as at July 2026.
Official sources: Australian Business Register — ABN registration, Australian Taxation Office — Registering for GST, Fair Work Ombudsman — Sham contracting, Fair Work Ombudsman — Employee or contractor, NSW Small Business Commissioner — Beware of fake ABN, TFN websites, business.gov.au — Register for GST.