Sole trader tax: What you need to know


As a sole trader, there are a few things you need to know to maximize your tax return. Ending a financial year can be stressful for most businesses, especially now that the ATO has streamline the tax return process. However, rest assured, with the tips we will share in this article, you will be able to maximize your tax return and calm whatever expenses you have on your list. We will also share some common mistakes that sole traders need to avoid.

Sole trader tax rate

For every sole trader working in Australia, they’re taxed as part of their own personal income, which makes personal income tax rate application.

How much can I earn as a sole trader without paying tax?

The tax-free threshold for sole traders is $18,200 in the 2021–2022 financial year.

Do sole traders get a tax return?

As a sole trader, you are obliged to file a tax return in order to claim business-related expenses and when your income is below the tax-free threshold. The question of whether sole traders can get a tax return or not depends on their income level and the costs expended during the financial year. You can use an income tax estimator to get an idea of the tax return you can claim. Alternatively, you can hire an expert accountant to work things out for you.

How is taxable income calculated as a sole trader?

According to the ATO, taxable income is calculated as the same rate as personal income. Based on the ATO’s calculation model, a sole trader taxable income is calculated by deducting the allowable deductions from the taxable income. The value after the calculation is what the sole trader will pay as tax.

How to pay tax as a sole trader

Sole traders have the opportunity to pay tax in different ways, including voluntarily entering into installments, putting money aside for the tax they expect to pay, or making tax pre-payments into their tax bill account.

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