A Simple Guide to Sole Trader Tax in Australia (2025)

Author: David Jhon

If you're running your own small business in Australia, you're likely working as a sole trader. That means you're the boss, and you also take care of your own taxes. It might sound a bit tricky, but don't worry — this guide explains everything you need to know about sole trader tax in a simple, step-by-step way.

Whether you're just starting or already earning income, this guide will help you understand what to do, when to do it, and how to stay on top of your taxes.

What Is a Sole Trader?

Before we talk about tax, let’s understand what being a sole trader means.

A sole trader is someone who runs a business by themselves. You make all the decisions and keep the profits, but you’re also responsible for everything, including paying tax. It’s the easiest type of business to set up in Australia and great for freelancers, tradies, small shop owners, and gig workers.

You don’t need to create a company. You just run your business under your own name or a business name.

How Much Tax Does a Sole Trader Pay?

Sole traders pay tax based on how much money they earn each year.

If you're a sole trader, your tax rate is the same as someone working a regular job. The more you earn, the more tax you’ll need to pay. Here are the sole trader tax rates for the 2024–25 financial year (not including Medicare levy of 2%):

Income Range

Tax Rate

$0 – $18,200

No tax

$18,201 – $45,000

16 cents per $1 over $18,200

$45,001 – $135,000

$4,288 + 30 cents per $1 over $45,000

$135,001 – $190,000

$31,288 + 37 cents per $1 over $135,000

$190,001 and over

$51,638 + 45 cents per $1 over $190,000

You still need to lodge a tax return, even if your income is below $18,200.

When Do Sole Traders Lodge Their Tax Return?

Tax returns are a big part of running a business, and there’s a deadline you need to know.

As a sole trader, you must lodge a tax return every year, just like regular employees. The due date is usually 31 October for the previous financial year. If you use a registered tax agent (like an accountant), you may get extra time to lodge your return.

So don’t leave it too late! Start early, keep your records tidy, and know your deadlines.

Important Tax Obligations for Sole Traders

Here’s a checklist of the key things every sole trader needs to do for tax.

Being a sole trader means you're responsible for following tax rules. These are the main things to remember:

1. Get an ABN (Australian Business Number)

You need an ABN to run your business. It’s a free 11-digit number that identifies your business to the government. You can register for an ABN on the Australian Business Registration website.

2. Use Your TFN (Tax File Number)

Your TFN is your personal tax number. You use it to lodge your tax return. You can’t share it with anyone else.

3. Report All Business Income

You must include all money you earn from your business in your personal tax return under the Business Schedule.

4. Register for GST (if you earn $75,000 or more)

If your income goes over $75,000 a year, you must register for GST within 21 days.GST is a value-added tax of 10% applied to the majority of products and services sold.

5. Pay Any Tax You Owe

Once you lodge your tax return, the ATO tells you how much you owe. You’ll have 21 days to pay the amount.

6. Pay Tax in Instalments (PAYG)

If you earn more, the ATO may ask you to pay tax in parts during the year, called PAYG instalments.

7. Lodge BAS (if registered for GST)

A Business Activity Statement (BAS) tells the ATO about your GST, PAYG, and other tax amounts.

What Tax Deductions Can You Claim?

You don’t have to pay tax on everything — some business expenses can be claimed to reduce your tax bill.

If you spend money to run your business, you may be able to claim it as a tax deduction. This means you’ll pay less tax. Some examples of tax-deductible expenses include:

  • Business travel and car use

  • Phone and internet used for work

  • Tools, supplies, and equipment

  • Rent for your home office or workspace

  • Personal super contributions (if eligible)

Just remember to keep your receipts and only claim business-related costs.

How to Lodge a Tax Return as a Sole Trader?

Let’s walk through the steps to lodge your tax return.

  1. Work out your business income for the year

    Add up everything you earned. The ATO might pre-fill some data, but keep your own records too.

  2. Calculate your business expenses

    List all the costs you can claim. This reduces the amount of income that is subject to tax, which in turn decreases the total tax you owe.

  3. Set up a myGov account and connect it to the Australian Taxation Office (ATO).

    This allows you to use myTax, a free online tax service. Follow the steps at my.gov.au.

  4. Lodge your tax return

    You can use myTax, paper forms, or ask a tax agent to lodge it for you.

  5. Wait for your tax notice

    The ATO will tell you if you get a refund or need to pay tax. If you owe money, you’ll need to pay within 21 days.

Final Thoughts

Being a sole trader means you're in charge, including your taxes. It might seem tricky at first, but once you understand the basics, it’s easy to stay on top of things. Keep good records, know your tax deadlines, and claim the right deductions.

You don’t have to do it all alone. Using tools like Solo by MYOB or getting help from sole trader tax services can make tax time much easier and stress-free.

With the right support, you can manage your tax confidently and focus on growing your business.