Your total business income before expenses
Materials, stock, and direct costs
Rent, utilities, marketing, insurance, etc.
After-Tax Income
$77,212.00
Monthly Net
$6,434.33
Weekly Net
$1,484.85
Effective Tax Rate
22.8%
Everything you need to know about sole trader tax in Australia
Sole trader tax structure
As a sole trader, you report your business income in your personal tax return. Your taxable income is your business revenue minus allowable deductions (cost of goods, operating expenses). This net profit is taxed at individual marginal rates.
What expenses can I deduct?
You can claim deductions for expenses directly related to earning your business income. Common deductions include cost of goods, rent, utilities, marketing, professional fees, home office expenses, vehicle costs, and depreciation of business assets.
Small business concessions
If your aggregated turnover is under $10 million, you may qualify for the small business income tax offset of up to $1,000 and the instant asset write-off for assets under $20,000.
ATO-Aligned: Uses 2025-26 individual tax rates and thresholds. Consult a registered tax agent for complex business structures.
How income tax works when you run your own business as a sole trader with an ABN
How does tax work for sole traders?
As a sole trader, your business income is your personal income. You add up all your business revenue, subtract your allowable deductions, and the profit is taxed at your personal income tax rates. If your business makes A$90,000 profit, you pay the same tax as someone earning a A$90,000 salary. You get the A$18,200 tax-free threshold and pay marginal rates from 19% up to 45% plus the 2% Medicare Levy.
What deductions can sole traders claim?
You can deduct any expense that is directly related to earning your business income. Common deductions include home office costs (67 cents per hour fixed rate or actual costs), vehicle expenses, phone and internet, equipment and tools, stock and materials, insurance, accounting fees, advertising, bank fees, and professional development. If an expense is partly personal and partly business, you can only claim the business portion.
Do sole traders need an ABN?
Yes. You need an Australian Business Number (ABN) to operate as a sole trader. It is free to apply through the Australian Business Register. Your ABN identifies your business to customers, suppliers, and the ATO. If you do not have an ABN and someone pays you for work, they must withhold 47% of the payment under PAYG withholding rules. An ABN is also needed to register for GST.
When do sole traders need to register for GST?
You must register for GST when your business turnover reaches A$75,000 or more in a 12-month period. Once registered, you charge 10% GST on your sales, claim GST credits on your business purchases, and lodge Business Activity Statements (BAS) quarterly or monthly. If your turnover is under A$75,000, registration is optional but can be worthwhile if your business expenses include significant GST.
Should sole traders pay themselves super?
You are not required to pay yourself super as a sole trader, but it is one of the smartest tax moves you can make. You can contribute up to A$30,000 per year and claim it as a tax deduction. A A$20,000 contribution from a sole trader earning A$100,000 reduces their taxable income to A$80,000, saving about A$7,400 in tax. Inside the super fund, the contribution is taxed at just 15% (A$3,000), so you come out well ahead.
How do PAYG instalments work for sole traders?
After your first tax return shows a tax liability, the ATO will usually require you to pay quarterly PAYG instalments. These are prepayments of your expected tax for the current year, based on your last return. You report and pay them on your BAS. At year end, the total instalments are credited against your actual tax bill. If you overpaid, you get a refund. This prevents a large tax bill at the end of the year.
What records must sole traders keep?
You must keep records of all income and expenses for at least five years. This includes invoices, receipts, bank statements, BAS lodgements, and vehicle logbooks. You need to keep records of any assets you use for business. Digital records are acceptable — many sole traders use accounting software like Xero or MYOB. The ATO can ask to see your records at any time during an audit, so staying organised is important.
What is the instant asset write-off for sole traders?
Eligible sole traders can immediately deduct the full cost of business assets costing up to A$20,000 each (for 2024-25). Instead of depreciating a A$15,000 laptop and printer setup over several years, you deduct the entire amount in the year you buy it. This reduces your taxable income straight away. The asset must be first used or installed ready for use in the income year. It applies to tools, equipment, vehicles, furniture, and software.
ATO-Aligned: Based on 2024-25 ATO rates and thresholds. For personal advice, speak to a qualified tax agent.
Disclaimer: This calculator provides estimates based on current ATO rates and thresholds for the 2024–25 financial year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified tax agent before making financial decisions. Read our terms
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