Sole trader tax calculator.
Tax on your business profit at individual rates, with the small business offset, Medicare levy and HELP — and how much to put aside from each payment.
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Sole trader tax, explained.
Quick answer
Sole traders are taxed as individuals. Profit (business income − deductible expenses) is added to any other income and taxed at the resident marginal rates plus the 2% Medicare levy. The small business income tax offset then cuts the tax on the business share by 16%, up to $1,000. Tax is paid through PAYG instalments during the year and settled on the tax return.
Step 1 — work out net business income
Business income is everything you earned from the business, excluding GST if you are registered. Deduct the expenses incurred in earning it: materials, subcontractors, vehicle (logbook or cents per kilometre — 91c for 2026–27, up to 5,000 km), tools and equipment (the $20,000 instant asset write-off applies to small businesses), phone and internet, insurance, software, bank fees, home office, and the business share of anything mixed. Private use is excluded. The sole trader tax return guide goes through what to report and claim.
Step 2 — tax at individual rates
Net business income is added to wages, interest and other income. The total is taxed at the ordinary rates — nil to $18,200, 15% to $45,000 (2026–27), 30% to $135,000, 37% to $190,000 and 45% above — plus the Medicare levy. If you also have a job, the business profit sits on top of your wages and is effectively taxed at your marginal rate from the first dollar.
Step 3 — the small business income tax offset
If your aggregated turnover is under $5 million, 16% of the income tax attributable to your net small business income is refunded as an offset, up to $1,000 a year. The offset is on the tax, not the income: a sole trader whose business profit attracts $6,250 of tax gets the full $1,000; one whose business tax is $3,000 gets $480. The ATO calculates it from the figures in your return.
Step 4 — paying it: PAYG instalments
After your first return with business income the ATO enters you into PAYG instalments. Each quarter (with your BAS if you lodge one) you prepay an amount based on last year's tax. When the next return is lodged the instalments are credited and you pay or receive the difference. New sole traders with no instalments in their first year often face a double hit — the first year's tax plus the first instalment for the next year — which is why setting aside a percentage from day one matters.
How much to set aside
| Profit | Tax + Medicare | Set aside |
|---|---|---|
| $40,000 | $3,064 | 8% |
| $60,000 | $8,620 | 14% |
| $80,000 | $15,120 | 19% |
| $100,000 | $21,520 | 22% |
| $150,000 | $38,570 | 26% |
GST is separate and on top: if you are registered, one-eleventh of every GST-inclusive payment belongs to the ATO. Lodging BAS and paying GST and instalments on time keeps the balance manageable; our BAS service handles the quarterly cycle.
Sources: ATO — Small business income tax offset, Resident tax rates, PAYG instalments. Estimates for general information only; the offset is approximated from the share of taxable income that is business income. Not advice.
Sole trader returns from $198.
Business schedule, deductions checked, instalments reconciled and the offset claimed — prepared and lodged by a registered tax agent for sole traders anywhere in Australia.
Sole trader tax — your questions.
How much tax does a sole trader pay in Australia?
A sole trader pays tax on business profit (income minus deductible expenses) at the same individual rates as an employee, plus the 2% Medicare levy, less the small business income tax offset. There is no separate business tax rate and no tax-free 'company' threshold — the $18,200 tax-free threshold applies once to your total income. On $70,000 of profit in 2026–27 the tax is about $11,920 after the offset and Medicare levy, before any HELP repayment.
What is the small business income tax offset?
A 16% discount on the income tax attributable to your net small business income, capped at $1,000 a year, for sole traders (and individuals with a share of a small business partnership or trust) with aggregated turnover under $5 million. The ATO works it out from your return; this calculator estimates it from your business and other income.
How much should a sole trader set aside for tax?
A common rule of thumb is 25–30% of profit, but it depends on your total income. The calculator shows the exact effective rate on your figures. Put that share of every payment into a separate account, and remember GST is on top if you are registered — the GST collected is never yours.
What are PAYG instalments?
Once you have lodged a return showing business income the ATO usually puts you on PAYG instalments — quarterly prepayments of the coming year's tax, based on last year's figures. They are credited against your tax when the next return is lodged. Enter instalments paid in the calculator to see the net amount owing or refundable. If your income has dropped you can vary them down.
Do sole traders pay super?
Not compulsorily on their own income. You can make personal contributions and claim a deduction for them (within the $32,500 concessional cap for 2026–27) by lodging a notice of intent with your fund before you lodge your return. If you have employees, or contractors paid mainly for their labour, you must pay 12% super guarantee for them — see our guide to super for ABN contractors.
Is a company better than a sole trader for tax?
A company pays a flat 25% (for base rate entities), which looks attractive above roughly $135,000 of profit — but money taken out as salary or dividends is taxed again in your hands with franking credits, and companies have ASIC fees and stricter rules (including Division 7A on loans). The right structure depends on profit level, risk, growth plans and family circumstances. Our business structures guide compares them, and the company tax calculator shows the company side.
More questions? See the full FAQ or ask us directly.
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Registered tax and BAS agents for sole traders Australia-wide.