Based in Sydney, Raja is a law student enrolled in a Bachelor of Laws and Bachelor of Communications (Writing and Publishing) at the University of Technology Sydney. He is passionate about transferring knowledge in relation to businesses, legal advice and marketing direction. Raja has experience working in immigration law and is driven by the writing, editing and publishing process of content.
Introduction
The digital products boom has transformed how Australians earn income online. From e-books and templates to online courses and software, the barrier to entry has never been lower. But while setting up a Shopify store or Gumroad account takes minutes, understanding your legal obligations takes a bit more work.
If you’re thinking about starting a digital product business in Australia, you’re not alone. The appeal is obvious: low overhead, scalable income, and the freedom to work from anywhere. But before you launch that first product, there are critical legal and tax considerations that many creators overlook and they can become expensive problems down the track.
Do You Need an ABN to Sell Digital Products in Australia?
This is the first question most people ask, and the answer isn’t as simple as yes or no.
An Australian Business Number (ABN) isn’t legally required just because you’re making money. However, if you’re running an enterprise or business activity, even a small one, you’ll generally need one. The Australian Taxation Office (ATO) defines a business as an activity done in a businesslike manner with the intention of making a profit.
Here’s where it gets practical. If you’re selling digital downloads regularly, marketing your products, building an audience, and generating consistent income, you’re running a business. That means you should have an ABN. Without one, suppliers or platforms may withhold tax at the top rate from any payments they make to you.
Having an ABN also allows you to claim business expenses, access certain tax concessions, and register for GST when required. If you’re serious about your digital product business, getting an ABN early simplifies everything. You can register for an ABN through Lawpath and get set up quickly without navigating the ATO website yourself.
Understanding GST for Digital Products
GST is where many digital product sellers get caught out. The threshold for GST registration in Australia is $75,000 in annual turnover. Once you hit that, you must register for GST, charge 10% on your sales, and lodge Business Activity Statements (BAS).
But digital products add another layer. If you’re selling to overseas customers, different rules apply. Digital products sold to consumers outside Australia are generally GST-free. However, if you’re selling to Australian customers, GST applies once you’re registered.
Many creators assume platforms like Teachable, Etsy, or Shopify handle GST for them. They don’t, at least not automatically. It’s your responsibility to track your turnover, register when required, and charge the correct amount. Failing to do so can result in penalties and a hefty back-tax bill.
Even if you’re below the threshold, voluntary GST registration might make sense if you’re purchasing tools, software, or services for your business. Registering lets you claim GST credits on those expenses, which can improve your cash flow.
Choosing the Right Business Structure
When you’re just starting out, most people operate as a sole trader. It’s simple, low-cost, and you can use your personal ABN. But as your digital product business grows, you may want to consider other structures for liability protection and tax efficiency.
A sole trader structure means there’s no legal separation between you and your business. If something goes wrong, a customer dispute, a contract issue, or an IP claim, your personal assets are on the line.
Registering a company provides a layer of protection. Your liability is generally limited to the company’s assets, not your personal wealth. It also looks more professional and can make it easier to work with larger clients or partners. For many digital product businesses, a proprietary limited (Pty Ltd) company is the sweet spot once revenue scales.
Trusts and partnerships are less common for solo digital creators but can be useful if you’re working with co-founders or want to distribute income for tax purposes. If you’re unsure which structure suits your situation, learn more about how to start a business in Australia and explore the trade-offs.
Protecting Your Intellectual Property
Your digital products are intellectual property (IP), and protecting them should be a priority from day one. Copyright automatically protects original works like e-books, courses, graphics, and software in Australia. You don’t need to register it, it exists as soon as you create something.
However, copyright alone won’t stop people from stealing or misusing your work. It’s worth including clear terms of use with every product you sell. Specify whether buyers can share, resell, or modify your content. Most digital products are sold with a single-user licence, meaning the buyer can use it but not redistribute it.
If you’re creating a brand around your digital products, a course name, a template suite, or a software tool, consider trademark protection. A trademark stops others from using your brand name or logo in a way that could confuse customers. It’s especially important if you plan to scale or licence your products to others.
Don’t assume platforms will protect your IP for you. If someone plagiarises your course content or resells your templates, enforcement is your responsibility. Building protection into your legal setup early makes it much easier to act if something goes wrong.
Website Terms, Privacy Policies, and Consumer Law
If you’re selling digital products online in Australia, you need website terms and conditions and a privacy policy. These aren’t optional, they’re legal requirements under Australian Consumer Law and privacy legislation.
Your terms and conditions should cover payment terms, refund policies, delivery timeframes (even for instant downloads), and liability limitations. They also set expectations around access, for example, whether a customer gets lifetime access to a course or a 12-month licence.
A privacy policy is required if you collect any personal information, which includes email addresses, payment details, or user behaviour data. It must explain what information you collect, how you use it, and how customers can access or delete their data. This is especially important if you’re using email marketing tools, payment processors, or analytics platforms.
Australian Consumer Law (ACL) applies to digital products just like physical goods. You must provide refunds if a product is faulty, doesn’t match the description, or isn’t fit for purpose. You can’t contract out of ACL rights, so avoid terms that say “no refunds under any circumstances.” Instead, outline your process clearly and comply with the law.
Tax Obligations Beyond GST
Even if you’re not registered for GST, you still need to declare income from your digital product business in your tax return. This applies whether you’re a sole trader or running a company.
As a sole trader, your business income is added to your personal income and taxed at your marginal rate. You can claim deductions for expenses directly related to earning that income, software subscriptions, website hosting, advertising, contractor fees, and home office costs.
If you’re operating through a company, the company pays tax on its profits at the corporate rate (currently 25% for eligible small businesses). You’ll also need to consider how you extract money from the company, whether as salary or dividends, each with different tax implications.
Keep good records from the start. Use accounting software to track income and expenses, and hold onto invoices and receipts. The ATO is increasingly focused on digital economy participants, and accurate records make tax time far less stressful.
Conclusion
Starting small doesn’t mean cutting corners. The digital product business ideas you launch today could scale into six or seven figures tomorrow, but only if your legal and tax foundations are solid.
Getting your ABN, understanding GST, protecting your IP, and setting up proper terms and policies aren’t glamorous tasks. But they’re what separate sustainable businesses from risky side hustles. And they’re much easier to put in place now than to retrofit later when you’re juggling customer complaints, platform fees, and ATO queries.
If you’re ready to start your digital product business in Australia the right way, take the first step and register your ABN through Lawpath. You’ll have the clarity and confidence to focus on what really matters, creating products people love.
