Sole trader tax return: what to report and what you can claim (2025–26)

A sole trader doesn't lodge a company return. Your business lives inside your own individual tax return, which means the profit you make is taxed alongside any wages, interest or rent you earn. Here's how the 2025–26 return fits together, what you can generally claim, and the dates and thresholds that matter.

Where business income goes in your return

In myTax (or in the return we prepare for you), sole trader income is reported in the Net income or loss from business section, supported by the business and professional items schedule. You enter gross business income and your expenses, and the net result flows to your taxable income. If a client withheld tax because you didn't quote your ABN, or paid you under a voluntary agreement, those amounts are reported in the same section.

Include every source of business income: invoiced sales, platform or app income, cash jobs, and payments reported about you through the Taxable Payments Annual Report (TPAR). The ATO pre-fills much of this, so unreported income tends to be noticed.

Personal services income (PSI) basics

If more than 50 % of what you earn under a contract comes from your own skills, knowledge or effort rather than from selling goods or using assets, it is personal services income. Think consultants, IT contractors and tradespeople who mainly supply labour.

PSI still has to be declared, but the PSI rules can restrict which deductions you claim unless you can self-assess as a personal services business. You do that by meeting the results test, or by passing the 80 % rule (less than 80 % of your PSI from any one client and their associates) together with one of the unrelated clients, employment or business premises tests. If 80 % or more of your PSI comes from one client and you don't meet the results test, the PSI rules apply unless the ATO issues a determination. We check this before lodging, because the answer changes what goes in your return.

Deductions you can generally claim

The test is the same as for any taxpayer: the expense must be incurred in running your business, you must not have been reimbursed, and you need a record. Common sole trader deductions include:

• Materials, stock and subcontractor costs.
• Tools, equipment, software subscriptions and phone or internet (business share only).
• Insurance, bank fees, merchant fees and interest on business borrowings.
• Advertising, website costs and professional memberships.
• Accounting and bookkeeping fees, including the cost of managing your tax affairs.
• Travel between job sites and to clients (but not the trip from home to your regular workplace).

Working from home

If you run your business from home, you can claim the additional running costs. The ATO's fixed rate method is 70 cents per hour for 2025–26 and covers energy, internet, phone and stationery together, with a record of actual hours worked (an estimate isn't accepted). The actual cost method lets you claim the work share of each bill, plus depreciation of your desk, chair and computer, if you keep the receipts and a representative record of use. Occupancy costs such as rent or mortgage interest are only claimable where part of the home is genuinely a place of business — and that can affect the main residence exemption when you sell, so talk to us first. Our working from home guide goes into the detail.

Motor vehicle: two methods

• Cents per kilometre. For 2025–26 the rate is 88 cents per kilometre, up to 5,000 business kilometres per car. The rate covers fuel, registration, insurance, servicing and depreciation, so nothing is added on top. You don't need receipts, but you do need a diary or similar record showing how you worked out the kilometres.
• Logbook. Keep a logbook for at least 12 continuous weeks that is representative of your travel, with odometer readings and the purpose of each business trip. It then supports a business-use percentage of your actual car costs for up to five years, as long as your pattern of use doesn't change. Keep receipts for fuel, servicing, registration and insurance, and a record of the car's cost for depreciation.

If you travel more than 5,000 kilometres for business, a logbook will usually give a higher claim; if you travel less, cents per kilometre is simpler. Where your records support both, we compare the two and use the larger allowable amount.

Instant asset write-off for 2025–26

If your aggregated turnover is under $10 million and you use the simplified depreciation rules, you can immediately deduct the business portion of eligible assets that cost less than $20,000 each and were first used or installed ready for use during 2025–26. The limit applies per asset, so several purchases can each be written off. Assets of $20,000 or more go into the small business pool and are depreciated at 15 % in the first year and 30 % after that. The ATO has confirmed the $20,000 limit is permanent from 1 July 2026, so the same rule carries into 2026–27.

A car limit of $69,674 applies to passenger vehicles in 2025–26, and a vehicle costing $40,000 can't be instantly written off even if the business portion is under $20,000 — the whole cost must be under the limit.

PAYG instalments

Once you have lodged a return showing instalment income of $4,000 or more, tax payable of $1,000 or more and notional tax of $500 or more, the ATO will automatically enter you into PAYG instalments. You then prepay tax, usually quarterly, and the instalments are credited against your assessment when you lodge. New sole traders can enter voluntarily so the first tax bill doesn't arrive as a lump sum, and instalments can be varied if your income changes.

GST: the $75,000 threshold

You must register for GST within 21 days once your GST turnover reaches $75,000 — on either a current (this month plus the previous 11) or projected (this month plus the next 11) basis. Taxi and ride-sourcing drivers must register from the first dollar. Below the threshold, registration is optional. Once registered you lodge a BAS (quarterly for most small businesses), charge GST on taxable sales and claim credits on business purchases. See our GST registration guide.

Super for yourself

Nobody pays super for a sole trader, so it is up to you. Personal contributions you make to your fund can be claimed as a deduction, provided you give the fund a notice of intent to claim in the approved form and receive its acknowledgment before you lodge your return. Deductible contributions count towards your concessional contributions cap and are taxed at 15 % inside the fund. Whether to contribute, and to which fund, is a personal financial decision — we can show you the tax effect, but we don't recommend products.

Records to keep

Keep invoices issued, receipts for expenses, bank statements, your logbook or kilometre diary, your hours-worked-from-home record, and details of assets bought and sold — for five years from the date you lodge. Bookkeeping software or the ATO's myDeductions tool makes this far easier than a shoebox.

Due dates

• Self-lodging: 31 October following the end of the income year (so 31-10-2026 for the 2025–26 return).
• Through a registered tax agent: if you're on our lodgment program before 31 October, most individual returns fall under the ATO's program date of 15-05-2027, with a concession to 05-06-2027 where any tax owing is paid by the same date. Clients with a prior-year return outstanding at 30-06-2026 stay on the 31 October date.

What we need from you

• Your ABN and whether you're GST registered.
• A summary of business income and expenses — software export, spreadsheet or bank statements.
• Kilometres or logbook, and your working from home hours record.
• Invoices for assets bought during the year.
• Your super fund's acknowledgment of any notice of intent.
• Details of any other income: wages, interest, dividends, rent, crypto.

Our tax return checklist covers the rest.

Sources

• ATO — myTax 2026: Net income or loss from business
• ATO — Personal services income
• ATO — Cents per kilometre method
• ATO — Logbook method
• ATO — Instant asset write-off for eligible businesses
• ATO — $20,000 instant asset write-off here to stay
• ATO — Starting PAYG instalments
• ATO — Registering for GST
• ATO — Personal super contributions
• ATO — Preparing your tax return (due dates)
• ATO — Registered agent lodgment program: individuals and trusts