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SOLE TRADER / 2026-27 / AUSTRALIA

Sole trader tax calculator

Estimate the tax on your sole trader profit for 2026–27: income tax at individual rates, the small business income tax offset of up to $1,000, the Medicare levy and HELP repayments.

Last verified: Methodology

Your details

01Business

Business income less business expenses, before tax.

Needed for the small business income tax offset.

02Other income

Interest, dividends, rent, net capital gains.

03Levies and loans

HELP (HECS), VET Student Loan, SSL, AASL or Financial Supplement debt. All are repaid together at the same rates.

Without an appropriate level of private patient hospital cover, higher earners pay the Medicare levy surcharge.

Tax for the year

$15,120

18.9% of your income, 2026–27

Income tax after offsets
$13,520
Small business income tax offset
$1,000
Low income tax offset
$0
Medicare levy
$1,600
Medicare levy surcharge
$0
Study loan repayment
$0
Income after tax
$64,880
Set aside per month
$1,260
Average rate
18.9%
  • Sole traders pay tax at individual rates on business profit. Nothing is withheld from business income, so set money aside for the bill.
  • The small business income tax offset is 16% of the tax on your business share of taxable income, up to $1,000 ($1,000 here).
  • The $1,000 standard deduction for work expenses applies only to salary and wages, not to business income. Claim business expenses before entering your profit.
  • Personal deductible super contributions and losses carried forward are not modelled here.

Tax for the year: $15,120 18.9% of your income, 2026–27

Your 2026–27 tax as a sole trader
LinePer year
Business profit$80,000
Taxable income$80,000
Income tax on taxable income$14,520
Small business income tax offset−$1,000
Medicare levy$1,600
Total tax, levies and repayments$15,120
Income after tax$64,880
Your income for the year
81%TAKE-HOME
  • Left after tax$64,88081%
  • Income tax$13,52017%
  • Medicare levy$1,6002%

2026–27 resident tax rates

Income Tax Rates Act 1986, Schedule 7. Each rate applies only to the part of taxable income inside its band.

Taxable incomeRateYour income in bandTax
$0 – $18,2000%$18,200$0.00
$18,201 – $45,00015%$26,800$4,020.00
$45,001 – $135,00030%$35,000$10,500.00
$135,001 – $190,00037%$0$0.00
$190,001 and over45%$0$0.00

$15,120

18.9% of your income, 2026–27

How it's calculated

A sole trader isn't a separate taxpayer: your business profit is added to any other income and taxed at the individual rates for 2026–27, with the Medicare levy on top. Two things are different from an employee.

  • Small business income tax offset. If your business has aggregated turnover under $5,000,000, you get an offset of 16% of the income tax on your business share of taxable income, up to $1,000 a year.Federal Register of Legislation
  • No standard deduction on business income. The new $1,000 standard deduction for work-related expenses only applies to salary and wages. Claim your actual business expenses instead, before you enter your profit.Federal Register of Legislation
  • Rates and levies. Income tax uses the resident rates (15% from $18,200 up to 45% above $190,000), less the low income tax offset, plus the 2% Medicare levy, any surcharge and any HELP repayment.Federal Register of LegislationFederal Register of Legislation

The formula

  1. Taxable income = business profit + salary + other income − standard deduction (salary only).
  2. Basic income tax = the resident rates applied to taxable income.
  3. Small business offset = min($1,000, 16% × (business profit ÷ taxable income) × basic income tax).
  4. Total = basic income tax − LITO − small business offset (not below nil) + Medicare levy + surcharge + HELP.

Worked example

On $80,000 of business profit and no other income, income tax is reduced by a small business offset of $1,000, and the total with the Medicare levy is $15,120. Setting aside $1,260 a month covers it.

$80,000 sole trader profitSOLE TRADER / 2026-27 / AUSTRALIA
LinePer year
Business profit$80,000
Taxable income$80,000
Income tax on taxable income$14,520
Small business income tax offset-$1,000
Medicare levy$1,600
Total tax, levies and repayments$15,120
Income after tax$64,880

If you also earn a $50,000 salary and the business makes $30,000, the offset is $864 and the total tax is $14,936.

$30,000 business profit plus $50,000 salarySOLE TRADER / 2026-27 / AUSTRALIA
LinePer year
Business profit$30,000
Salary and wages$50,000
Standard deduction (on salary only)-$1,000
Taxable income$79,000
Income tax on taxable income$14,220
Small business income tax offset-$864
Medicare levy$1,580
Total tax, levies and repayments$14,936
Income after tax$65,064

Assumptions and limitations

  • Profit is net small business income: business income less business deductions. Net capital gains and personal services income that isn't from a personal services business don't qualify for the offset.
  • A full year as a resident (or foreign resident: no tax-free threshold, Medicare levy or offsets other than the small business offset).
  • Not modelled: GST, personal super contributions, losses from earlier years, non-commercial loss rules and PAYG instalments.
FAQ

Questions people ask

How much tax does a sole trader pay in Australia?

A sole trader pays income tax on business profit at the same rates as any individual: nothing on the first $18,200 for residents, then 15%, 30%, 37% and 45% for 2026–27, plus the 2% Medicare levy. Profit is added to any salary or other income you have. Most sole traders also get the small business income tax offset of up to $1,000, which lowers the bill.

What is the small business income tax offset?

It is a tax offset for individuals who run a small business with aggregated turnover under $5 million, either as a sole trader or through a partnership or trust. It equals 16% of the income tax on the part of your taxable income that comes from net small business income, capped at $1,000 a year. It is worked out automatically from your tax return and can't create a refund on its own.

Can sole traders claim the $1,000 standard deduction?

Only against salary and wages. The standard deduction for work-related expenses, new from 2026–27, applies to assessable labour income such as wages, director fees and parental leave pay. Business income is not labour income for this purpose, so a sole trader claims actual business expenses instead. If you also have a job, you can use the standard deduction for that salary.

Is tax taken out of sole trader income?

Usually not. Unlike wages, payments to a sole trader with an ABN don't have PAYG tax withheld, so you pay the tax when you lodge your return or through instalments during the year. It's sensible to put aside money from each payment you receive. This calculator shows a monthly amount to set aside for the year's income tax, Medicare levy and any HELP repayment.

Is it better to be a sole trader or a company?

A company pays a flat 25% (base rate entity) or 30% on its profit, while a sole trader pays progressive personal rates plus the Medicare levy. At lower profits a sole trader often pays less because of the tax-free threshold and lower bands. At higher profits a company can pay less on profit it keeps, but dividends paid out are taxed again at personal rates with franking credits.

Sources

  1. Federal Register of LegislationIncome Tax Rates Act 1986 (compilation 1 July 2026), Schedule 7 – 2026-27 rates · retrieved 2026-10-16
  2. Federal Register of LegislationIncome Tax Assessment Act 1997 (compilation 27 August 2026) – LITO s 61-115, standard deduction s 25-130 · retrieved 2026-10-16
  3. Federal Register of LegislationTreasury Laws Amendment (Tax Reform No. 1) Act 2026 – $1,000 standard deduction from 2026-27 · retrieved 2026-10-16
  4. Federal Register of LegislationMedicare Levy Act 1986 (compilation 1 July 2026) · retrieved 2026-10-16
  5. Federal Register of LegislationTreasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Act 2026, Schedule 5 – Medicare levy low-income thresholds · retrieved 2026-10-17
  6. Federal Register of LegislationPrivate Health Insurance Act 2007, Division 22 – surcharge tiers and indexation · retrieved 2026-10-17
  7. Federal Register of LegislationHigher Education Support Act 2003 (compilation 1 July 2026), Division 154 – compulsory repayments · retrieved 2026-10-17

Last verified: CalcBloc Editorial Team