Sole Trader Tax in AustraliaWhat You Pay and What to Set Aside

How an Australian sole trader is taxed

A sole trader is not a separate taxpayer. Your business profit is added to any other income you have and taxed on your individual return, at the same rates as everyone else. There is no company return, and tax is not withheld from what you earn the way it is for an employee, so the tax is yours to work out and put aside.

The rates above are for a resident taxpayer. The first A$18,200 is tax-free, then 15% up to A$45,000, then 30% up to A$135,000, 37% up to A$190,000, and 45% above that. On top of income tax comes the Medicare levy at 2% of taxable income.

The 15% rate is new for 2026-27: the same band was taxed at 16% in 2025-26. If you earn A$66,667 or less you may also be entitled to the low income tax offset, worth up to A$700; the examples below are above that, so no offset applies to them.

Worked examples: tax on a year of profit

Both examples are taxable profit for 2026-27, meaning takings minus allowable expenses, for a resident with no other income and no offsets. They are illustrations, not a return.

How the first one works: 15% of the A$26,800 between A$18,200 and A$45,000 is A$4,020, then 30% of everything above A$45,000 up to A$80,000, and 2% of the full A$80,000 for Medicare. Your own figure depends on your other income, your offsets and the Medicare low-income rules, so confirm it with your accountant or the ATO.

How much to set aside

Work from profit, not takings. Estimate what you will have left after expenses over the year, read the tax off the rates or examples above, and divide it across the weeks you expect to be paid. The ATO's own PAYG instalments example does the same thing: it divides the estimated annual amount by 52 to get a weekly figure to put aside.

Keep GST out of that pot entirely. If you are GST-registered, the GST on your invoices is not yours to spend or to count as income; it belongs in its own set-aside for your BAS. The GST calculator splits any amount into its GST and ex-GST parts.

Invio's dashboard shows an income tax and Medicare estimate and a set-aside figure for Australian accounts. It works from the income you have received so far this financial year, before expenses, so treat it as a rough guide that runs high if you have large deductions, not as your return. Where the ATO places you in PAYG instalments and when they fall due is covered in the sole trader financial reporting guide, along with the lodgement dates.

Super when you work for yourself

Nobody has to pay super for you as a sole trader, including you, so putting money into super is a choice. Voluntary personal contributions can be tax-deductible if you give your fund a valid notice of intent to claim a deduction and it acknowledges the notice, before you lodge your return for that year (or, if earlier, by the end of the following income year). A deducted contribution counts towards your concessional contributions cap, which is A$32,500 from 1 July 2026. The sole trader expenses guide has the claim itself.

When you must register for GST

You must register once your GST turnover (your business income, excluding GST) reaches A$75,000, or you expect it to over the next 12 months, and you have 21 days from that point to do it. Below the threshold registration is optional. It is turnover that counts here, not profit. The tax invoice requirements guide covers what changes on your invoices once you are registered.

How long to keep your records

Keep most business records for 5 years. The ATO counts the 5 years from when you prepared or obtained the record, or completed the transaction it relates to, whichever is later, and some records need to be kept longer. That covers the invoices you issue, receipts for what you claim, and bank statements. Digital copies are fine, and a receipt is stronger evidence than a bank line alone. The expenses guide says what to keep for each type of claim.

Related reading

Sole Trader Tax FAQs

Common questions from Australian sole traders about income tax, the Medicare levy and GST.