How Much Should Australian Sole Traders Set Aside for Tax? (2025-26)

As a sole trader in Australia, no one withholds tax from your invoices — so part of every payment is really the ATO's. Set it aside as you earn and tax time stops being a shock.

What tax does a sole trader pay?

You report business profit on your individual tax return and pay tax at resident marginal rates (2025-26): 0% up to $18,200, then 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above — plus a 2% Medicare levy once you're over the low-income threshold. There is no separate company tax.

The simple rule: set aside 25–30%

For most sole traders, saving 25–30% of net profit comfortably covers income tax plus the Medicare levy. Higher earners should lean toward 30–35%.

GST kicks in at A$75,000

Once your annual turnover reaches A$75,000 you must register for GST, charge 10% on taxable sales and lodge a quarterly Business Activity Statement (BAS). Below that, registration is optional.

PAYG instalments

After your first year the ATO usually enrols you into PAYG instalments — quarterly prepayments toward your annual bill based on your last return.

Work out your number automatically

Get an exact estimate with our free Australia sole trader tax calculator, or read the full Australia sole trader tax guide. MoneyFeed keeps a live tax-set-aside target as you text expenses on WhatsApp.