How is sole trader tax calculated in Australia?

Sole trader business profit (gross income minus deductible expenses) is taxed at the individual marginal rates that apply to wage and salary income. The same brackets, LITO, Medicare levy and HECS rules apply. There is no separate business tax return. Business income is reported in the business and professional items section of the individual return. The Small Business Income Tax Offset can knock up to $1,000 off the tax bill if aggregated turnover is under $5 million.

What is the GST registration threshold for a sole trader?

$75,000 of GST turnover for general businesses, $150,000 for not-for-profits. Registration is mandatory once you reach the threshold (21 days to register from the date you cross it). Taxi, limousine and rideshare drivers must register regardless of turnover. Below the threshold you can register voluntarily (and stay registered for at least 12 months) to claim GST credits on purchases.

What is the small business income tax offset?

A non-refundable tax offset for individuals carrying on a small business as a sole trader (or receiving a small business distribution from a partnership or trust) with aggregated turnover under $5 million. The rate has been 16% since the 2021-22 income year, applied to the proportion of basic tax payable that relates to net small business income. The offset is capped at $1,000 per person per year and is calculated automatically by the ATO from the tax return.

When does a sole trader have to pay PAYG instalments?

The ATO enters individuals (including sole traders) into PAYG instalments automatically once all three of these tests are met from the most recent tax return: instalment income of $4,000 or more, tax payable of $1,000 or more on the notice of assessment, and estimated (notional) tax of $500 or more. Instalments are usually quarterly. New sole traders can also opt in voluntarily to smooth cash-flow and avoid a single large tax bill at the end of the year.

Can a sole trader claim a tax deduction for personal super?

Yes. Sole traders can claim a tax deduction for personal contributions made to their super fund, up to the concessional contributions cap ($30,000 for 2024-25 and 2025-26, $32,500 for 2026-27 with the next AWOTE indexation step). The contribution must be made before 30 June and a valid Notice of Intent to Claim a Deduction (NAT 71121) must be lodged with the fund (and acknowledged) before lodging the tax return. The fund will tax the contribution at 15% (contributions tax) on the way in.

Do sole traders get a tax-free threshold?

Yes, sole traders are taxed as individuals, so the $18,200 tax-free threshold and LITO apply. Foreign residents and working-holiday-maker rates work the same way they do for wages: no tax-free threshold for foreign residents and a flat 15% on the first $45,000 for 417/462 visa holders. This calculator defaults to Australian resident.

Calculator · FY 2026-27

Sole Trader & ABN Tax Calculator

Work out income tax, Medicare, HECS and the 16% small business offset on your ABN income. Includes the $75,000 GST registration check and a quarterly PAYG instalment estimate, for 2024-25, 2025-26 and the legislated 2026-27 Stage 3 rates.

Gross business income (AUD / yr) Total sales, fees, contract payments invoiced this financial year, GST-exclusive if you're registered for GST. e.g. $120,000 in client invoices, before any expenses Business expenses (AUD / yr) Deductible costs incurred in earning that income: subscriptions, equipment, vehicle, home-office portion, insurance, accounting fees. excludes drawings, personal items, GST on purchases if you claim GST credits

Other income, e.g. PAYG wages (AUD / yr) Wages, dividends, rent or anything else outside the ABN business added to taxable income at marginal rate, reduces the SBITO ratio

Financial year

I have a HELP/HECS debt I have private hospital cover (suppresses MLS)

Advanced: personal super, residency, super context

Personal deductible super contribution (AUD / yr) Sole traders can claim a deduction for personal super up to the concessional cap ($30,000 in 2025-26). A valid Notice of Intent must be lodged with the fund before tax return; fund deducts 15% contributions tax

Residency for tax Default: Australian resident Foreign / WHM have no tax-free threshold

As a sole trader you are not required to pay super for yourself, so no employer SG is included in the figures above. Any personal deductible contribution reduces your taxable income; the fund taxes it at 15% on the way in.

Calculations run in your browser. Nothing is sent.

Sources applied

Sole trader taxed at individual rates · ATO QC31723 (business structures: key tax obligations) · sole trader uses individual TFN, no separate business return
Resident tax brackets, LITO and Medicare levy · ATO 2025-26 resident scale: $18,200 / 16¢ / 30¢ / 37¢ / 45¢, Medicare levy 2% with $27,222 single low-income threshold and $34,027 phase-in upper
Small Business Income Tax Offset (SBITO), 16%, capped $1,000 · ATO QC49023 · aggregated turnover < $5m, applied to the proportion of basic tax payable on net small business income
GST registration threshold $75,000 · ATO QC22369 (registering for GST) · mandatory at $75k GST turnover, taxi/limousine/rideshare mandatory regardless
PAYG instalment automatic entry (individuals/sole traders) · ATO QC45456 · instalment income ≥ $4,000 AND tax payable ≥ $1,000 AND estimated tax ≥ $500
Concessional super cap $30,000 (2025-26), $32,500 (2026-27) · ATO key super rates and thresholds · indexed in $2,500 steps to AWOTE
HECS/HELP, 2025-26 marginal system · ATO QC16176 · nil < $67,000, 15¢ to $125k, $8,700 + 17¢ to $179,285, 10% of total above

Verified against ato.gov.au

What the calculator does (and what it doesn't)

Sole trader tax in Australia is the individual income-tax scale applied to net business profit (gross income minus deductible business expenses), with the same Medicare levy, LITO and HECS rules that apply to wages. The differences worth modelling are the Small Business Income Tax Offset, the GST registration threshold and the PAYG instalment automatic-entry trigger.

The calculator does:

Compute the income tax on net business profit plus any other income, using the same locked rate tables that power the income tax calculator (so the figures match to the cent).
Apply LITO and the Medicare levy at the standard residency rules. Medicare levy surcharge is set to zero if private hospital cover is ticked, which is the default.
Compute the 16% Small Business Income Tax Offset on the proportion of basic tax that relates to net small business income, capped at $1,000 per person per year. If aggregated turnover (gross business income for a single sole trader) is at or above $5 million, the offset is set to zero.
Apply HECS if ticked, using the 2025-26 marginal repayment system (nil under $67,000, 15c/$ to $125k, $8,700 + 17c/$ to $179,285, 10% of total repayment income above).
Flag GST registration: required at $75,000 of GST turnover, available voluntarily below that.
Estimate quarterly PAYG instalments at one-quarter of the annual tax payable (income tax after offsets plus Medicare). Treat this as an order of magnitude. The actual ATO instalment rate or amount on your activity statement uses last year's tax with a GDP uplift (4% for 2025-26), not this year's estimate.
Flag whether the three automatic-entry tests for PAYG instalments are likely to be met based on the figures entered.

The calculator does not:

Compute GST payable. GST is a separate quarterly BAS calculation; the BAS Calculator covers that case.
Model non-commercial loss rules. If business expenses exceed gross business income, the calculator treats the loss as zero for the SBITO calculation. Whether that loss can offset other income in your tax return depends on the four tests at ato.gov.au/non-commercial-losses.
Model the personal services income (PSI) rules. If your ABN income is from one or two main clients you may need to apply the PSI rules at ATO QC22167 before computing tax.
Apply the small business CGT concessions, the instant asset write-off, or the small business restructure rollover. These are claimed in different return labels and depend on the asset category.
Apply the announced-but-not-legislated Working Australians Tax Offset, $1,000 instant deduction or third-tranche Stage 3 cut. See the changelog for the policy log.

How the SBITO actually works

The Small Business Income Tax Offset is the most-misunderstood number on this page, so worth a paragraph in plain English.

It's 16% of the proportion of your basic income tax bill that relates to net small business income, capped at $1,000 a person a year. The formula the ATO applies is:

offset = min($1,000, 16% × basic income tax × net small business income ÷ taxable income)

So if you earn 100% of your taxable income from the ABN business, the offset is just 16% of basic tax up to $1,000. If half your income is PAYG wages and half is ABN, the offset is 16% × half of basic tax, again capped at $1,000. A sole trader hits the $1,000 cap once basic tax payable on their net business income is around $6,250, which is roughly net business income above $50,000 once LITO is taken into account. Below that, the offset scales linearly.

Personal super contributions are excluded from "net small business income" for the SBITO calculation, per the ATO. The calculator reflects that: it subtracts your business expenses but not your super deduction when working out the SBITO ratio.

GST: do I have to register?

You must register for GST within 21 days of your GST turnover hitting $75,000. GST turnover is your projected gross income over the next 12 months (or your actual gross over the last 12), GST-exclusive. Once registered you charge 10% GST on your taxable sales, can claim GST credits on business purchases, and lodge a BAS, usually quarterly. Below $75k registration is voluntary; if you do register voluntarily you have to stay registered for at least 12 months. Taxi, limousine and ride-share drivers must register regardless of turnover.

PAYG instalments: how the ATO decides

The ATO enters individuals (including sole traders) into PAYG instalments automatically when, on your most recent tax return, all three of these are true: instalment income of $4,000 or more, tax payable on your notice of assessment of $1,000 or more, and estimated (notional) tax of $500 or more. You're notified by myGov inbox letter and asked to start paying quarterly. The default instalment is one of two ATO options: a notional amount based on last year's tax with a GDP uplift (4% for 2025-26), or an instalment rate applied to this quarter's actual business income. You can vary either if your circumstances have changed.

Frequently asked

Is sole trader business income taxed differently from wages?: No. Net business profit is added to your taxable income and taxed at the same individual marginal rates as wages. Sole traders get the same $18,200 tax-free threshold, LITO and Medicare-levy rules. The two differences worth noting are the 16% Small Business Income Tax Offset (worth up to $1,000) and the rules around PAYG instalments and GST registration.
How much tax does a sole trader pay on $100,000?: On $100,000 of net business income (i.e. after deductible expenses) the 2025-26 numbers are $20,788 income tax, less the maximum $1,000 small business offset, plus $2,000 Medicare levy, for a total of $21,788. After-tax cash is $78,212 before any HECS. A salaried worker on $85,000 takes home roughly the same ($67,012 after $17,988 PAYG and Medicare). Gross-to-net the sole trader is keeping more, but they don't get employer super on top.
Can I claim my car, phone and home office?: Yes, the deductible business-use portion. For a vehicle, either the cents-per-kilometre method (88¢/km for 2024-25 and 2025-26, capped at 5,000 km) or the logbook method (12-week logbook, then business-use percentage of actual costs including car loan interest and depreciation). The Car expense deduction calculator works both methods side-by-side and recommends the bigger claim. For a phone, the work-use portion of the bill. For a home office, either the ATO fixed-rate method at 70¢/hour (see the WFH calculator) or the actual-cost method. Each method has its own records requirement; the ATO will deny the deduction if you can't substantiate it.
How much super should I put in as a sole trader?: There's no minimum. Sole traders don't have to pay themselves super. But personal contributions claimed as a deduction reduce your taxable income at your marginal rate. The fund taxes the contribution at 15% on the way in (contributions tax), so the net saving is your marginal rate minus 15%. At the 30% bracket that's a 15-cent-in-the-dollar saving, at the 37% bracket it's 22 cents. The cap is $30,000 a year for 2024-25 and 2025-26, $32,500 for 2026-27. Lodge a Notice of Intent (NAT 71121) with your fund before lodging your return.
What happens if I miss the $75,000 GST threshold?: If you cross it and don't register within 21 days the ATO can backdate your registration to the date you crossed the threshold, which means you owe GST on sales made between that date and the day you register. You can usually still claim GST credits on purchases over the same period. Voluntary registration before the threshold lets you claim credits on startup costs from day one, but locks you into BAS lodgement for at least 12 months.
Do I need an accountant?: This site doesn't claim either way. The figures here are general estimates, source-verified against the ATO. A tax agent can sign off on the borderline calls: PSI rules, mixed business / private expenses, the difference between a repair and a capital improvement, whether a deduction is "substantiated". On a clean sole-trader return at <$100k turnover you may not need one. On anything with company structures, multiple income streams, or assets sold during the year, professional advice usually pays for itself.