I plan to provide independent consulting.
I am trying to understand different business structures and tax implications (obligations and deductions)
What is the difference between Sole trader vs Freelancer, from a taxation point of view?
Does this impact the ABN registration process?
Freelancer is not a business structure. Business structures are sole trader, partnership, company and trust. As an independent consultant your income would be personal services income (PSI). To be considered as a PS business (PSB) then you need to apply and pass the PSB tests. See link. https://www.ato.gov.au/calculators-and-tools/income-personal-services-income-tool
If the PSI you receive does not pass the tests then there are limits on deductions. See this link. https://www.ato.gov.au/newsrooms/small-business-newsroom/personal-services-income-and-your-tax
Freelancer is not a business structure. Business structures are sole trader, partnership, company and trust. As an independent consultant your income would be personal services income (PSI). To be considered as a PS business (PSB) then you need to apply and pass the PSB tests. See link. https://www.ato.gov.au/calculators-and-tools/income-personal-services-income-tool
If the PSI you receive does not pass the tests then there are limits on deductions. See this link. https://www.ato.gov.au/newsrooms/small-business-newsroom/personal-services-income-and-your-tax
2 Dec 2025 · 6 min read time
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