Sole Trader Tax Guide Australia: What You Can Claim

As an Australian sole trader, tax can feel like a wall of confusing obligations. This guide cuts through the noise to explain what you actually owe, what you can claim back, how GST fits in, and what good record-keeping looks like - in plain language.

This article is general information only, not tax advice. Tax rules change and individual circumstances vary. Check the ATO website or speak with a registered tax agent or accountant for advice specific to your situation.

What Does an Australian Sole Trader Owe in Tax?

Operating as a sole trader in Australia, your business income is treated as personal income. There's no separate company tax return - it all flows through your individual tax return, lodged with the Australian Taxation Office (ATO). The main obligations are:

Income tax - paid on your net profit (revenue minus allowable deductions), at the same progressive rates that apply to any Australian resident individual. For the 2026-27 income year (the year running now), the tax-free threshold is $18,200, then 15c for every $1 between $18,201 and $45,000, then $4,020 plus 30c for every $1 between $45,001 and $135,000, then $31,020 plus 37c for every $1 between $135,001 and $190,000, then $51,370 plus 45c for every $1 over $190,000 (these figures exclude the Medicare levy). The 15c rate reflects a legislated cut from 16c that took effect 1 July 2026. Check the current rates on the ATO website before you rely on them, since brackets can change each year.
GST - if you're registered for GST, you collect 10% GST on your sales, claim it back on eligible purchases, and lodge regular Business Activity Statements (BAS). See the GST section below.
PAYG instalments - once your business income and tax payable cross a threshold, the ATO has you prepay tax in instalments during the year rather than a single bill at tax time. See below.

Unlike employees, a sole trader has no employer withholding tax from a payslip - the income tax, and PAYG instalments if you're in the system, are on you to set aside and pay.

GST: When You Need to Register and What It Means

GST (Goods and Services Tax) in Australia is set at 10%. You must register for GST if your turnover reaches A$75,000 in a 12-month period (or you expect it to) - this is a rolling window, not just a financial year. You can also voluntarily register below that threshold if it makes sense for your business, for example if you have significant GST-bearing expenses you want to claim back. You need an ABN before you can register for GST - having an ABN by itself does not mean you are registered.

Once registered:

You add 10% GST to your invoices and collect it from clients
You can claim GST credits on business expenses that include GST
You lodge regular Business Activity Statements (BAS) through ATO online services (monthly, quarterly, or annually depending on your turnover and what you choose)
If a customer asks, you must give them a tax invoice within 28 days for any sale over A$82.50 (including GST), and it must show the buyer's identity or ABN once the sale reaches A$1,000 - see the AU tax invoice requirements guide for the full checklist

GST is not your income - you're collecting it on the ATO's behalf. Keep that money separate so you're not caught short at BAS time. If you're not registered, don't add GST to your invoices and don't call them tax invoices; the how to invoice as a sole trader in Australia guide covers the difference.

If you're not yet registered, watch your rolling 12-month turnover as you approach the $75,000 threshold. You need to register within 21 days of reaching or expecting to reach it.

PAYG Instalments Basics

PAYG (Pay As You Go) instalments are how the ATO collects income tax progressively during the year instead of one lump sum at tax time. You're generally brought into the system automatically once your instalment income from your latest tax return is $4,000 or more and the tax payable on your latest notice of assessment is $1,000 or more - or you can opt in yourself through ATO online services.

Most sole traders pay quarterly. Three of the four instalments are due 28 days after quarter-end (28 October, 28 April, 28 July); the exception is the October-December quarter, due 28 February rather than 28 January, so it doesn't clash with the December BAS deadline. You can choose between two methods: the ATO calculates a fixed instalment amount for you, or it gives you an instalment rate that you apply to your actual business income each quarter, which tracks better if your income moves around a lot.

When you lodge your tax return, whatever you've paid in PAYG instalments during the year is credited against your actual income tax bill - you get a refund if you overpaid, or you pay the difference if you underpaid. If you think your instalments are heading well above or below what you'll actually owe, you can vary them rather than wait for the year-end reconciliation.

The practical habit that makes all of this painless: set money aside as you earn it, in a separate account earmarked for tax, rather than treating everything that lands in your business account as spendable. Exactly how much depends on your income and whether you're GST-registered - ask your accountant or check the ATO's guidance for a figure that fits your situation.

What You Can Claim: Deductions in Brief

You can deduct business expenses from your income before tax is calculated. The general rule from the ATO: the cost must be genuinely incurred in earning your business income, and it must not be private or domestic in nature. Common categories for Australian sole traders include vehicle costs (cents-per-km or logbook method), tools and equipment, home office costs (the ATO's fixed-rate method, 70 cents an hour for 2024-25 and 2025-26), phone and internet, professional fees, insurance, subcontractor payments, and software subscriptions like Invio. On tools and equipment: an instant asset write-off let you claim eligible assets up to A$20,000 in full in the year you bought them, for businesses under $10m turnover, for assets first used between 1 July 2025 and 30 June 2026. A 2026-27 Budget proposal to make that A$20,000 threshold permanent from 1 July 2026 has been announced but, as at time of writing, is not yet law - check ato.gov.au for the current position before relying on it for a purchase made now.

One structural difference worth knowing if you've read tax guides for other countries: client entertainment - meals, drinks, recreational entertainment - is generally not deductible at all in Australia under Division 32 of the tax law, even when business gets discussed. There are narrow exceptions, but don't assume a client lunch is claimable.

This is a summary, not the full picture - see the sole trader expenses Australia guide for the complete category-by-category breakdown, including how GST registration changes the amount you actually claim.

Superannuation: What Changes When You're Your Own Boss

Superannuation guarantee - the compulsory contribution an employer pays on top of wages - doesn't apply to your own earnings as a sole trader. Nobody is required to pay super for you, and that includes you.

You can still make voluntary personal contributions to your own super fund, and they're tax-deductible if you handle the paperwork correctly: you need to give your fund a valid notice of intent to claim a deduction, and your fund needs to acknowledge it, before you lodge your tax return for that year (or by the end of the following income year, whichever is earlier). The concessional contributions cap - the limit on contributions that get the tax-deductible treatment - is $32,500 for the 2026-27 income year (up from $30,000 in 2025-26). Miss the notice-of-intent step and the contribution stays untaxed super money without the deduction, which is the opposite of what most sole traders are trying to achieve.

Because nobody else is doing it for you, retirement saving is genuinely a choice you have to make deliberately rather than something that happens automatically in the background of every pay cycle.

Record-Keeping: What to Keep and for How Long

Good records aren't just useful at tax time - they protect you if the ATO ever reviews a claim. The ATO's rule for most business records: keep them for at least 5 years from when you prepared or obtained the record, or the transaction was completed, whichever is later.

What to keep:

All invoices you issue (your income records)
All receipts and invoices for business expenses
Bank statements for any accounts used for business
A vehicle logbook if you're using the logbook method for vehicle claims
BAS lodgments and workings if you're registered for GST
Any contracts or agreements with clients or subcontractors

Electronic records are fine - the ATO accepts digital copies, and a bank statement line alone is weaker evidence than the original receipt or invoice, so keep both where you can. Some sole traders use a dedicated business bank account to keep income and expenses separate, which makes reconciliation much simpler at year-end.

Invoicing software like Invio keeps your issued invoices organised and accessible automatically. See the how to invoice as a sole trader in Australia guide for how to set up a clean invoicing process from day one.

End-of-Year: Filing via myTax

The Australian financial year runs from 1 July to 30 June. If you lodge your own individual tax return, it's due by 31 October following the end of the financial year. If you engage a registered tax agent, they can often lodge later under their own program - but you generally need to be on their books before 31 October to get that extension, so don't leave it to the last week.

The process via myTax (accessed through a myGov account linked to the ATO):

Log in to myGov and open your individual tax return for the relevant year
Enter your total business income for the year (much of this may already be pre-filled from other sources by late July)
Enter your total allowable deductions
myTax will calculate your net profit and the income tax owing
Any PAYG instalments already paid are credited against the total due
If you overpaid, you'll receive a refund; if underpaid, you pay the balance

A good accountant or registered tax agent can handle the return for you and will often find deductions you missed. Their fee is itself a deductible expense. For many sole traders, especially as income grows, having professional help at tax time pays for itself.

To keep your invoicing and financial records organised throughout the year - making tax time much simpler - see Invio's features or compare plans.