If you run a business in your own name with an ABN, you are a sole trader, and the business’s profit is simply part of your personal income. There is no separate business tax return and no separate tax rate. But there is also no employer taking tax out as you go, so the bill for the year arrives in one piece unless you plan for it.
This guide explains how sole trader income is taxed in the 2026–27 income year (1 July 2026 to 30 June 2027): the rates, the small business income tax offset, the Medicare levy, HELP, super and how much to put aside. Figures are calculated live by the sole trader tax calculator.
The short version
On a business profit of $80,000 with no other income, a resident sole trader pays $15,120 in income tax and Medicare levy for 2026–27, after a small business income tax offset of $1,000. Putting aside $1,260 a month covers it.
$15,120
- 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
Show the breakdown
| Line | Per 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 |
- Left after tax$64,88081%
- Income tax$13,52017%
- Medicare levy$1,6002%
How sole traders are taxed
Your taxable income is your business income less your business expenses, plus any other income such as a salary, interest or rent, less your other deductions. It is taxed at the same resident rates as everyone else’s: nothing on the first $18,200, then 15% up to $45,000, 30% up to $135,000, 37% up to $190,000 and 45% above.Federal Register of Legislation
You report the business in the business schedule of your individual tax return. The same offsets apply as for employees, including the low income tax offset, and you pay the same Medicare levy. The tax brackets guide explains how the rates apply slice by slice.
The calculator asks for your profit, so work out your business expenses first. Only expenses incurred in earning your business income count, and private use of things like a car or phone has to be taken out. Keep records of income and expenses through the year: invoices, receipts and bank statements are what support the profit you report.
If the business makes a loss, you can’t always set it against your salary or other income in the same year. Special rules for non-commercial losses decide whether the loss can be used now or has to be carried forward to a later year when the business makes a profit. The calculator works with a profit of zero or more and doesn’t model losses.
Tax at common profit levels
For a resident sole trader with no other income, a turnover under the small business limit and private hospital cover:
| Business profit | Income tax | Medicare levy | Total for the year | Set aside a month |
|---|---|---|---|---|
| $40,000 | $2,172 | $800 | $2,972 | $248 |
| $60,000 | $7,420 | $1,200 | $8,620 | $718 |
| $80,000 | $13,520 | $1,600 | $15,120 | $1,260 |
| $100,000 | $19,520 | $2,000 | $21,520 | $1,793 |
| $150,000 | $35,570 | $3,000 | $38,570 | $3,214 |
| $200,000 | $54,870 | $4,000 | $58,870 | $4,906 |
Income tax in this table is after the low income tax offset and the small business income tax offset. Here is the full working at $80,000:
| Line | Per 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 |
The small business income tax offset
If your business’s aggregated turnover is under $5,000,000, you get the small business income tax offset. It is 16% of the income tax on the business share of your taxable income, up to a maximum of $1,000 a year.Federal Register of Legislation
The cap is reached at a fairly modest profit. On $40,000 the offset is $523; on $60,000 it is already $1,000, and it stays there at higher profits. Without it, tax on an $80,000 profit would be $16,120 instead of $15,120.
You don’t apply for the offset. The ATO works it out from the net small business income you report. Net capital gains don’t count towards it, and nor does personal services income unless you are running a personal services business.
Medicare levy, surcharge and HELP
You pay the Medicare levy of 2% on your taxable income, with the same low-income and family reductions as employees. The Medicare levy surcharge applies if your income is over $105,000 as a single and you have no private hospital cover: on a $130,000 profit it adds $1,625. The Medicare levy guide covers both.
A HELP or other study loan is repaid on the same scale as for employees, but because nobody withholds it, the whole year’s repayment is added to your assessment. On an $80,000 profit it is $1,571, which takes the year’s total to $16,691. The HELP repayments guide explains the thresholds.
No standard deduction on business income
The new $1,000 standard deduction for work expenses applies only to labour income such as salary and wages. It doesn’t apply to business profit, because you claim your business expenses in full instead.Federal Register of Legislation
That makes for an interesting comparison. On the same $80,000, an employee pays $15,800 with the standard deduction, and a sole trader pays $15,120 with the small business offset. But the employee also receives $9,600 of super guarantee on top, paid for by the employer, which the sole trader has to fund out of their own profit.
A business on the side of a job
Many sole traders also have a job. Your salary and your business profit are added together and taxed as one income, so the business profit is taxed at your top marginal rate. Your employer withholds tax on the salary only, and the tax on the business is added when you lodge.
The small business offset then covers only the business share of your income. With a $60,000 salary and a $30,000 business profit, the offset is $929 and the year’s tax is $18,071. Of that, the tax on the salary should already have been withheld through PAYG; the rest is the bill to plan for.
Setting money aside
Start with the year’s total from the calculator and work back from there. Include any HELP repayment and, if you have no private hospital cover and a high income, the Medicare levy surcharge, because both are added to the same bill.
Because nothing is withheld from business income, the simplest habit is to move a share of every payment you receive into a separate account. The “set aside a month” figures above are the year’s total spread evenly across the months; putting aside a fixed share of each invoice works just as well. On an $80,000 profit, total tax is 18.9% of your income.
Once you have lodged a return showing business income, the ATO may put you into the PAYG instalments system, so that you pay tax on your business income during the year, usually quarterly, rather than all at once. The calculator doesn’t work out instalments, but the yearly total it shows is what the instalments are meant to cover.
Super when you work for yourself
The super guarantee only applies to employees, so as a sole trader no one pays super for you. You can contribute to super yourself and may be able to claim a deduction for it. Personal deductible contributions count towards the same concessional cap of $32,500 and are taxed at 15% in the fund.Federal Register of Legislation The calculator doesn’t model these contributions, so a deductible contribution would lower your tax below the figures shown. The super guide explains the cap.
GST and trading through a company
GST is a separate obligation. If you are registered, you charge GST of 10% on most sales and pass it to the ATO, and you claim back the GST on your business purchases.Federal Register of Legislation Registration is compulsory once your turnover passes the registration threshold. GST you collect is not your income, so leave it out of your profit. The GST calculator adds or removes GST from a price.
Some businesses move into a company as profits grow. A company that is a base rate entity pays 25% on its profit, but getting money out to you as salary or dividends brings personal tax back into play, and running a company costs more. The company tax calculator shows the company side. For your own figures as a sole trader, use the sole trader tax calculator, and for salary, other income and deductions together, the income tax calculator.
Figures are estimates for 2026–27 worked out from the Income Tax Rates Act 1986 and the Income Tax Assessment Act 1997. They are not tax advice.
