Self-Employed Tax in Australia

A sole trader in Australia operates a business in their own name without incorporating. There is no separate legal entity: all net business profit flows onto the individual's personal tax return and is taxed at resident marginal rates. The Australian tax year runs 1 July to 30 June. For 2025-26, sole traders lodge an Individual Tax Return with the Business and Professional Items supplementary schedule via the ATO myTax portal. For incorporated structures see the Australia country overview and Australia small business tax pages.

What are the 2025-26 income tax rates for a sole trader?

Sole traders pay income tax at the same progressive individual rates as employees. The Stage 3 tax cuts, made permanent from 2024-25, apply in full for 2025-26. The Medicare Levy of 2% applies to most taxable income; those below approximately AUD 26,000 receive a reduction or exemption. Higher earners without private hospital cover may also face the Medicare Levy Surcharge of 1% to 1.5% [SC1].

Only the income within each bracket is taxed at that rate. A sole trader with AUD 80,000 net profit pays nil on the first AUD 18,200, then 16% on AUD 26,800 (AUD 4,288) and 30% on AUD 35,000 (AUD 10,500): income tax AUD 14,788, plus Medicare Levy AUD 1,600, for a combined AUD 16,388 (effective rate ~20.5%).

What is the ABN and how do PAYG instalments work?

The Australian Business Number (ABN) is the free 11-digit identifier issued through the Australian Business Register. Registration is required before issuing tax invoices, registering for GST, or accessing government programs. Without an ABN, payers of invoices are required to withhold 47% under the ATO no-ABN withholding rules [SC2].

PAYG Instalments spread the expected annual tax liability across four quarterly prepayments. The ATO enters a sole trader into the system automatically when the prior-year notional tax liability exceeded AUD 1,000. Due dates: 28 October (Q1), 28 February (Q2), 28 April (Q3), and 28 July (Q4). The ATO pre-calculates the quarterly amount using GDP-adjusted prior-year tax; alternatively, sole traders may apply an ATO-supplied rate to actual quarterly income. At year-end the instalments are credited against the tax assessment, with any excess refunded [SC3].

When does GST registration apply?

GST registration is mandatory when annual turnover reaches AUD 75,000 (AUD 150,000 for non-profits). The threshold is measured on a rolling 12-month basis; a sole trader crossing it at any point must register within 21 days [SC2]. The GST rate is a flat 10% on most supplies. Once registered, the sole trader collects GST on sales, claims input tax credits on business purchases, and reconciles both on a quarterly Business Activity Statement (BAS). Voluntary registration below AUD 75,000 is available and often beneficial for businesses with GST-registered customers who can recover the GST.

Does a sole trader pay compulsory superannuation for themselves?

No. The Superannuation Guarantee applies to employers contributing for employees; as their own boss, a sole trader has no compulsory SG obligation to their own account. Voluntary personal deductible contributions up to the 2025-26 concessional cap of AUD 30,000 are tax-deductible and taxed at a flat 15% inside the fund rather than at the contributor's marginal rate [SC4]. A Notice of Intent to Claim a Deduction must be lodged with the fund before the individual return is submitted. The carry-forward rule lets sole traders with a Total Super Balance below AUD 500,000 draw on unused cap from up to five prior years. The non-concessional (after-tax) cap is AUD 120,000 for 2025-26.

What deductions, write-offs, and offsets apply?

Sole traders may deduct expenses incurred in earning assessable business income: business premises rent or home office running costs (AUD 0.70 per hour under the ATO fixed-rate method for 2025-26), motor vehicle costs on an actual or logbook basis, equipment depreciation, professional fees, and marketing and subscription costs [SC5].

Instant Asset Write-Off (2025-26): Businesses with aggregated turnover below AUD 10 million may deduct eligible assets costing less than AUD 20,000 each, first used or installed between 1 July 2025 and 30 June 2026. The limit applies per asset. Assets at or above AUD 20,000 enter the small-business depreciation pool [SC6].

Small Business Income Tax Offset (SBITO): Sole traders with turnover below AUD 5 million receive a non-refundable 16% reduction in tax payable on net small business income, capped at AUD 1,000 per year. The ATO calculates and applies the offset automatically at lodgement [SC5].

All figures above are sourced from the ATO and confirmed for the 2025-26 income year. For outcomes specific to your situation, consult a registered tax agent as defined under the Tax Agent Services Act 2009.