Sole Trader Tax Calculator
Estimate your income tax, GST obligations, and recommended tax set-aside for 2025-26. Built for Australian sole traders, freelancers, and ABN contractors.
Tax Year
GST Registration
Required if turnover > $75,000/yr. Voluntary registration is allowed below this.
Your revenue exceeds $75,000. You are legally required to register for GST.
Enter an invoice amount to see exactly how much to set aside from that payment.
Set aside for tax
$1,153
23.1% of invoice
Recommended Tax Set-Aside
23.1%
of revenue
This includes your estimated income tax (18.1% effective rate) plus a 5% buffer for under-estimates and penalties.
Tax Breakdown
Gross revenue
$120,000
Total expenses
−$13,500
Super deduction
−$10,000
Taxable income
$96,500
Income tax
$19,738
Medicare levy
$1,930
Total tax
$21,668
Net after tax
$98,332
Effective rate
18.1%
Marginal rate
30.0%
Quarterly BAS Summary
PAYG installment per quarter
Estimated — ATO will confirm after first return
$5,417
Sole Trader vs Company Structure
A company pays a flat 25% tax rate (base rate entity, turnover < $50M). Whether this saves money depends on your income level — high earners benefit most, but company structures involve extra admin costs.
| Metric | Sole Trader | Company (25%) | Difference |
|---|---|---|---|
| Taxable income | $96,500 | $96,500 | — |
| Tax paid | $21,668 | $24,125 | Extra $2,457 |
| Tax rate | 18.1% | 25.0% | 6.9% lower |
| Extra annual admin cost | — | ~$2,000–$5,000 | ASIC fees + accountant |
Tax Tips for Sole Traders
Home office — 67c/hr
Use the ATO's revised fixed-rate method: 67 cents per hour for all running costs (internet, electricity, stationery). Keep a diary to record hours. No longer requires a dedicated room.
Claim super before 30 June
Personal super contributions are deductible if you lodge a "notice of intent to claim" with your fund before lodging your tax return. The concessional cap for 2025-26 is $30,000. Tax inside super is 15% — much lower than most marginal rates.
Invoicing best practices
Always include your ABN on invoices. If GST-registered, include your GST number, the words "Tax Invoice", the GST amount separately, and the date. Customers cannot claim GST credits without a valid tax invoice.
PAYG installments
After you lodge your first tax return with business income, the ATO will likely enrol you in PAYG installments — quarterly prepayments toward your tax bill. You can vary the amount if your income changes.
Instant asset write-off
Small businesses with aggregated turnover under $10M can immediately deduct assets under $20,000 (check current threshold each year). Larger assets go through the simplified depreciation pool.
Keep a separate business account
Open a dedicated business bank account and set aside your tax estimate from every payment received. Transfer it immediately — you'll avoid the stress of a large tax bill you can't pay.
How is sole trader tax calculated in Australia?
Australian sole traders and ABN contractors are taxed as individuals using the standard personal income tax brackets. There is no flat rate — the same progressive brackets apply as for employees. Your taxable income is your gross revenue minus all legitimate business deductions (expenses, home office, vehicle, depreciation) and any personal super contributions you claim. From that taxable income, you pay income tax at the applicable rate, plus the 2% Medicare levy. The Low Income Tax Offset (LITO) of up to $700 may reduce your tax bill if your taxable income is below $66,667.
What is a good tax set-aside percentage for sole traders?
A common rule of thumb is to set aside 25%–30% of every invoice into a separate savings account specifically for tax. However, the right percentage depends on your gross revenue, deductible expenses, and whether you have other income. This calculator gives you a personalised set-aside rate based on your actual estimated tax liability plus a 5% buffer. High-income sole traders (over $135,000 taxable) should set aside closer to 40%–45% to cover the 37%–45% marginal rates plus Medicare levy.
When do sole traders need to register for GST?
You must register for GST if your business turnover is $75,000 or more in a 12-month period, or if you expect to reach $75,000 within 12 months. Once registered, you must include 10% GST on taxable invoices, lodge Business Activity Statements (BAS) — quarterly or monthly — and remit the net GST (collected minus input tax credits) to the ATO. The $75,000 threshold is based on GST turnover, not profit. Some businesses voluntarily register below the threshold to claim GST input tax credits on purchases.
Sole trader vs company: which is better for tax?
A company pays a flat 25% tax rate on taxable profits (for base rate entities with turnover under $50M), compared to the top individual marginal rate of 45%. This means high-income operators can retain profits in the company at 25% and distribute them later as franked dividends. However, companies have additional setup costs (ASIC fees, more complex accounting), cannot use the 50% CGT discount on assets held in the company, and require separation of personal and business finances. For most sole traders earning under $120,000– $180,000 in taxable income, operating as an individual is simpler and often cheaper overall.