Sole Trader Tax Calculator Australia

How Much Tax Does a Sole Trader Pay in Australia?

In Australia, sole traders pay tax at standard individual income tax rates. There is no separate "business tax rate" for sole traders. All profits your business makes are considered your personal income.

Your taxable income is calculated by subtracting your allowable business expenses from your total business turnover. For the current financial year, the tax rate on the lowest taxable bracket has been reduced to simplify filing and support small business owners.

ATO Tax Brackets for FY 2026-27 (Current):

• $0 – $18,200: Nil tax.
• $18,201 – $45,000: 15c for each $1 over $18,200.
• $45,001 – $135,000: $4,020 + 30c for each $1 over $45,000.
• $135,001 – $190,000: $31,020 + 37c for each $1 over $135,000.
• $190,001 and above: $51,370 + 45c for each $1 over $190,000.

Worked Example:

Say you're a sparky pulling in $95,000 a year, with $15,000 in legit deductions — tools, ute expenses, and public liability insurance. Your net taxable income is $80,000. Under the FY 2026-27 rates:
- The first $18,200 is tax-free.
- Income between $18,201 and $45,000 is taxed at 15%: ($45,000 - $18,200) × 15% = $4,020.
- Income between $45,001 and $80,000 is taxed at 30%: ($80,000 - $45,000) × 30% = $10,500.
Your basic income tax is $4,020 + $10,500 = $14,520.

The Medicare Levy — What Sole Traders Need to Know

Most Australian taxpayers must pay the Medicare levy. This is a flat 2% of your taxable income, which goes toward funding the public healthcare system.

As a sole trader, you must add this 2% levy on top of your standard income tax when setting money aside.

In our example with $80,000 taxable income, the Medicare levy is:
$80,000 × 2% = $1,600.
This brings the total tax before offsets to $14,520 + $1,600 = $16,120.

Small Business Income Tax Offset — Free Money Most Tradies Miss

The Small Business Income Tax Offset provides a discount of up to $1,000 per year on the tax payable on your business income.

To be eligible, you must be a sole trader or partner in a partnership with an aggregated business turnover of less than $5 million. The offset is calculated at 16% of the basic income tax payable on your business profit.

Continuing with our $80,000 taxable profit example:
- Your basic tax is $14,520.
- 16% of $14,520 is $2,323.20.
- Since the offset is capped at $1,000, you receive the maximum $1,000 discount.
This reduces your final tax bill to $16,120 - $1,000 = $15,120.

How to Calculate Your Sole Trader Tax — Step by Step

What Can Sole Traders Claim as Tax Deductions?

Operating expenses directly related to earning your income can be claimed as tax deductions to reduce your overall tax bill.

Common claims for sole traders in the trades sector include:

• Tools & Equipment: Power tools, hand tools, safety gear, ladders, and laptops.
• Work Vehicle Costs: Fuel, servicing, registration, and insurance for your ute or van (using a 12-week logbook or cents-per-km method).
• Insurances: Public liability, income protection, and professional indemnity.
• Phone & Office Expenses: Business portion of mobile phone bills, internet, and bookkeeping software.
• Licences & Training: Licensing fees, union fees, and courses that directly relate to your current trade.

Keeping digital copies of receipts is vital. If you pay subcontractors to assist on jobs, their fees are also a deductible business expense. Make sure you work out correct rates by using our hourly rate calculator.

How Much Tax Should I Set Aside Each Week?

A common pitfall for new sole traders is spending the tax portion of their income. Because tax isn't withheld, you must set aside a portion of each invoice.

As a general rule, transferring 25% to 30% of your net profits into a separate savings account ensures you have the cash ready when tax time arrives.

Using our tool above, you can calculate the exact weekly or monthly savings target. For instance, an $80,000 net profit requires a weekly transfer of approximately $291.

FY 2026-27 Tax Bracket Changes

Effective 1 July 2026, the tax rate for the lowest taxable bracket ($18,201 to $45,000) was reduced from 16% to 15%. This comes in addition to the Stage 3 tax cuts introduced in FY 2024-25 which reduced the 32.5% rate to 30%.

This means sole traders retain more of their earnings than in prior years. For a sole trader with a taxable income of $80,000, these combined cuts translate to significant annual tax savings.

Do Sole Traders Need to Lodge a BAS?

You must lodge a Business Activity Statement (BAS) if you register for GST. GST registration is compulsory when business turnover exceeds $75,000.

Your BAS is used to report and pay GST collected, claim GST credits back on expenses, and pay PAYG tax instalments throughout the year. If you need to manage your GST amounts, you can use our GST calculator to estimate your quarterly BAS figures.