You are surely familiar with your neighbourhood discount store. They’re an integral part of shopping in Australia, offering affordable household goods, stationery, party supplies, and more. With cost‑of‑living pressures mounting, local consumers continue to seek value, making discount retail a consistent sector even in uncertain times.
Yet competition is steep, with heavyweights like Kmart and Daiso dominating large‑format retail, and countless independents filling suburban centres. As such, it’s critical to get every detail right if you plan to go into this competitive industry.
This guide will cover both the business and legal sides of how to start a discount store in Australia. We’ll go over everything, from registering the right business structure to securing council permits, ensuring tax compliance, and writing staff contracts.
We’ll also explain how Lawpath can simplify the entire process by helping with ABN and ACN registrations, legal document templates, and compliance support.
Table of Contents
Why start a discount store in Australia?
Australia’s retail sector is transforming, but discount stores remain resilient. With households looking to stretch weekly budgets, demand for affordable everyday items is strong across suburban and regional markets.
Unlike trend‑driven sectors such as fashion, discount stores sell staples — cleaning products, kids’ gifts, stationery — that remain in demand year‑round.
Advantages
- Steady demand: Consumers seek affordable options regardless of economic cycles.
- Broad customer base: Families, students, retirees, and small businesses shop at discount outlets.
- High volume sales: While margins are slim, steady turnover and repeat visits drive revenue.
- Adaptability: Unlike niche retailers, discount stores can stock a broad product mix tailored to local market tastes.
Challenges
- Thin profit margins: Margins are often 5–15%. One small business forum user noted, “Margins are small but volume makes up for it — you can’t survive without high turnover.”
- Competition: Major chains (Kmart, Big W) and overseas discounters (Daiso, Miniso) have significant buying power and brand recognition.
- Cash flow risks: Seasonal fluctuations, supplier delays, and rising freight costs can squeeze independent stores.
- Overhead pressures: Rent, staff wages, and compliance obligations can be difficult to balance against low‑cost goods.
For many operators, the real appeal lies in localising their offer to serve neighbourhood centres or regional towns where big‑box stores don’t dominate. While competition exists, the right niche, lean cost structure, and professional compliance setup can carve out a viable business.
To help you get started with opening a discount shop, here is a step-by-step guide.
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Step 1: Decide on your business structure
The first decision is choosing the right business structure. In Australia, your options include sole trader, partnership, or company. Each has implications for liability, tax, and growth potential.
- Sole trader: Cheapest and simplest to set up. Unlimited personal liability means that if your discount store racks up debt, your personal assets are at risk. Income is taxed at individual rates.
- Partnership: Suitable if starting with family or friends. Requires a partnership agreement. Like a sole trader, liability is shared personally among partners.
- Company (Pty Ltd): The most common choice for retail founders. A company is a separate legal entity. This means liability is limited to company assets, giving your personal finances more protection. Also, tax is at the corporate flat rate (currently 25% for small businesses), rather than marginal personal rates.
Most discount store owners opt for a company structure. While setup costs are higher, the benefits include liability protection, better perception with suppliers, and easier access to finance.
To operate, you’ll need:
- An ABN (Australian Business Number) is required to invoice and trade.
- An ACN (Australian Company Number) is used if operating as a company.
Lawpath offers packages that streamline this setup, helping you focus on the business side of things while we take care of legalities.
Step 2: Register your business and get the required licences
Once you’ve decided on your business structure, the next big step is adhering to the legal requirements for retail businesses in Australia. This might sound complex, but it’s really just about making sure your store is recognised legally and set up to trade properly.
- ABN (Australian Business Number): This is your business ID for invoicing and trading. You can apply online through the Australian Business Register in just a few minutes.
- ACN (Australian Company Number): If you’re setting up a company, you’ll also need an ACN. This is managed by ASIC (the corporate regulator).
- GST registration: Once your store is turning over more than $75,000 a year (which most discount stores do quite quickly), you’ll need to register for Goods and Services Tax (GST) so you can add it to sales and claim credits on expenses.
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Business name
If you’re trading under anything other than your own personal name, you’ll need to register your business name with ASIC. This makes your store’s name official and allows you to use it on signage and marketing.
Local council permits
When it comes to licenses for retail stores, each council sets rules for retail premises. This means you’ll need to check what’s required in your area. Look out for things like:
- Zoning approvals: These are needed if the site hasn’t previously been approved for retail use.
- Signage permits: For example, in Sydney, illuminated exterior signs require formal council approval.
- Fit‑out approvals: In Melbourne, even internal changes like new shelving or counters may need review by a council building surveyor.
Employer obligations
If you plan to hire staff, there are a few extra boxes to tick:
- Solid employment agreements help protect your business and your staff, ensuring everyone is aligned in terms of responsibilities and expectations.
- Workers’ compensation insurance is mandatory in every state to protect employees if something goes wrong at work.
- Superannuation contributions (currently 12%) must be made into employees’ super funds.
- Payroll tax applies in some states if your total wages go over certain thresholds (this usually affects larger operations, but check your state’s rules early).
All of these details ensure your discount store is set up properly, minimising the risk of council issues, fines, or disputes down the track.
Work Health and Safety (WHS)
Last but not least, you’ll need to adhere to national WHS law, which requires all retailers to provide a safe work environment. This includes fire safety exits, shelving height standards, and manual handling protocols.
Step 3: Build your discount store business plan
A business plan is critical both for internal clarity and external funding. At a minimum, your business plan should contain:
- Introduction of your business: Explain what type of business you plan to launch, the niche you will occupy in the market, and so on.
- Competitor analysis: Identify nearby discount chains, dollar stores, and variety shops.
- Financial forecast: Make 12–24 month projections, factoring in the break‑even point.
- Funding strategies: Explain how you plan to fund your business, including strategies like small business loans, family investment, or vendor financing of inventory.
Banks or investors are more willing to back ventures with structured plans and responsible financial modelling.
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Cost to start a discount store
Discount store startup budgets usually range between $50,000–$150,000, depending on location and size. Cost areas include:
- Shop fit‑out (shelving, counters, security systems): $15,000–$40,000
- Initial inventory: $20,000–$60,000
- Rent and bond: $10,000–$30,000
- Staff wages (first 2–3 months): $15,000–$25,000
- Insurance and compliance: $5,000–$10,000
- Marketing and signage: $5,000–$15,000
Remember that most of these costs can be claimed as business-related expenses when you file your taxes at the end of the financial year.
Also, consider that typical profit margins sit between 5% and 15%. Success comes through volume and quick stock rotation rather than high markup. Your financial forecast should model cash flow, recognising that slow‑moving stock reduces profitability.
Step 4: Find the right location and suppliers
Location is the make‑or‑break factor for discount retail. Customers rarely drive across town to a discount store, which means foot traffic is non‑negotiable. Favour sites near supermarkets, chemists, or within neighbourhood shopping strips.
Retail lease agreements in Australia typically run 3–5 years, with options for renewal. Ensure you review the Retail Leases Act in your state — it outlines what landlords can and can’t charge (e.g., limits on fit‑out contributions). A legal review of your lease is strongly recommended; hidden costs in outgoings, security deposits, and rent escalations can undermine new stores.
Suppliers
Once you’ve sorted your location, you’ll also need to source your supplies. Discount stores rely on affordable sourcing to protect margins. This may involve:
- Local wholesalers and importers.
- Direct overseas suppliers (often via ports in Sydney or Melbourne).
Forum discussions among new retailers often stress supplier issues: “Shipping delays can eat into your peak season — always line up backup wholesalers.” Supplier contracts need to be clear about delivery times, returns policies, and exclusivity clauses.
A practical step is to diversify stock suppliers early rather than depending on one. Quality may vary, and customer trust can erode quickly if goods are faulty.
Step 5: Hire and manage staff legally
Now that you have a shop and goods to sell, you’ll likely need to hire some staff. Discount retailers are labour‑reliant, especially in stocking and customer service.
Employees in discount retail typically fall under the General Retail Industry Award (2020). This mandates:
- Minimum hourly wages
- Penalty rates for weekends and public holidays
- Overtime rules
- Casual loading (25%) if engaging staff on flexible terms
It’s important to write all of these obligatory terms into solid retail employment contracts. Never rely on verbal arrangements. Written contracts prevent disputes and protect both sides.
Additionally, you’ll need to comply with payments, taxes, and superannuation. Here are key things to keep in mind:
- Set up single‑touch payroll reporting through the ATO.
- Contribute the current super guarantee rate (12%).
- Withhold PAYG tax from employee wages.
Employers must also comply with anti‑discrimination laws when hiring and rostering.
Step 6: Stay compliant with tax and ongoing obligations
Staying on top of tax and compliance is one of the less exciting parts of running a discount store, but it’s absolutely essential. Many new retailers get caught out here, and the penalties for mistakes can be costly.
Most discount stores will pass the GST threshold ($75,000)fairly quickly. This means you’ll need to add GST to your sales and report it through quarterly Business Activity Statements (BAS). Note that:
- Sole traders record this on their personal tax return
- Companies pay a flat small business tax rate of 25%.
If you set up as a company, keep in mind that directors also need to account for any salaries or dividends they draw. Additionally, you’ll have annual reporting obligations with ASIC. That includes lodging a company review each year, paying the renewal fee, and keeping accurate financial records for at least seven years.
On top of the paperwork, insurance is another key compliance area that protects both you and your customers.
- Public liability insurance is critical in case a customer is injured on your premises.
- Workers’ compensation insurance is mandatory if you employ staff.
- Product liability insurance is highly recommended if your store sells risky goods like electrical items or imported products.
To see what happens when compliance slips, consider one Queensland retailer who was fined thousands for breaching signage rules and failing to maintain workers’ compensation cover. Issues like this don’t just attract fines; they can also damage your store’s reputation and disrupt trading.
Common challenges of running a discount store
Running a discount store isn’t without hurdles.
- Competition with big retailers: Chains offer economies of scale you can’t match. Counteract this by tailoring stock to local needs (e.g., ethnic groceries, craft supplies).
- Thin margins and cash flow: Stock only fast‑moving items. Negotiate supplier credit terms where possible.
- Staff turnover: Retail sees high attrition; invest in clear rostering, fair treatment, and legal contracts.
- Lease negotiations: Landlords may increase rent at renewal. Know your rights under your state’s Retail Leases Act.
Success often hinges on managing these risks strategically, not just driving sales.
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Checklist: How to start a discount store in Australia
Decide on business structure (company recommended for liability protection).
Register ABN, ACN, GST.
Secure business name.
Obtain council permits (signage, zoning, fit‑out).
Develop a business plan with clear financial forecasts.
Budget for startup costs ranging $50k–$150k.
Find high‑traffic location and negotiate retail lease with legal review.
Set up supplier contracts — avoid reliance on one wholesaler.
Hire staff under General Retail Award; prepare contracts.
Arrange workers’ comp, WHS policies, and super registration.
Set up payroll, super, PAYG, and insurance policies.
Remain compliant with ASIC annual reviews and ATO filings.
FAQ
What is the best business structure for a discount store?
Most owners choose a company structure, since it offers liability protection and a flat small‑business tax rate, making it safer than operating as a sole trader.
How much does it cost to start a discount store in Australia?
Typical costs range between $50,000 and $150,000, depending on location, size, and fit‑out requirements.
Do you need a licence to run a discount store?
Yes. You’ll need an ABN, possible council permits for signage/fit‑outs, and GST registration once turnover exceeds $75,000.
Get started and ensure ongoing compliance for small businesses
Starting a discount store in Australia isn’t just about sourcing cheap products and stacking shelves. Long‑term success relies on sound legal and business foundations — from choosing the right structure to staying tax‑compliant and securing staff contracts. Discount stores thrive on volume and accessibility, but compliance is what protects your investment.
Lawpath can help you register your business, prepare supplier and employment agreements, and stay compliant with ASIC and ATO obligations. We are here to give you the legal foundation to focus on starting your business with success.
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