Registration
Entity
For tax and GST purposes an entity is any person or organisation that can carry on a business or earn income, including individuals, companies, partnerships, trusts and super funds.
Entity is a broad word used in tax law for the 'who' of the system. It covers individuals, companies, partnerships, trusts, superannuation funds, associations and certain government bodies. Whenever the law talks about who must register, who makes a supply, or who can claim a credit, the answer is an entity. Understanding which entity you operate through is the foundation for most other tax decisions.
For GST, the entity that carries on the enterprise is the one that registers and reports. A sole trader is the individual themselves, so the ABN and GST registration belong to the person. A company is a separate legal entity with its own ABN and GST registration. A partnership is treated as an entity for GST, and so is a trust, which typically registers through its trustee. Each registered entity lodges its own BAS.
The entity you choose affects how much tax you pay and the risks you carry. A company pays tax at its own rate, and its owners are generally not personally liable for its debts, but there are extra compliance obligations. A sole trader has the simplest set-up but unlimited personal liability. Trusts and partnerships sit in between and have their own rules on how income is shared. These matters belong to broader business planning, and professional advice is useful.
The concept also matters for turnover tests. The registration threshold looks at an entity's GST turnover, but some rules look across related or connected entities, so a business that splits sales across several entities to stay below the line may find the ATO looking at the whole picture. Aggregated turnover for small business concessions has its own rules for connected entities and affiliates.
When you deal with other entities, you need to make sure you invoice the right one. Your tax invoice should show the correct supplier name and ABN. If a business trades under a name, the legal entity name should still be clear. Mistakes here can cause credit claims to fail, because the invoice must be from the entity that made the supply.
A common misunderstanding is believing that a business name is an entity. A business name is only a trading name used by an entity and does not give a separate legal existence. Another is assuming that a person who works through a company and as a sole trader at the same time has just one ABN. These are separate entities, each with its own obligations.
This is general information. For help choosing or reviewing your structure, consult the ATO or a registered tax professional.
Worked example
Greg operates a plumbing business through a company, Greg Plumbing Pty Ltd, which has its own ABN and is registered for GST. When the company invoices a customer $5,500 including GST, the invoice shows the company name and ABN, and the company reports $500 of GST on its BAS. Greg personally is a different entity and does not report that GST on his own return.
Practical tips
- Make sure your invoices show the correct legal entity name and ABN, not just a trading name.
- Remember that each registered entity lodges its own BAS, even when the same person controls several.
- Think about structure before you start trading, since changing entity later can have tax consequences.