How sole trader tax works in Australia
There is no separate business tax rate for a sole trader. Your business profit — income minus allowable deductions — is added to any other income you have and taxed at the ordinary resident marginal rates: nothing on the first $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000 and 45% above. On top sits the 2% Medicare levy, and lower earners keep the Low Income Tax Offset of up to $700.
The Small Business Income Tax Offset
If your unincorporated business has aggregated turnover under $5 million, you get an offset worth 8% of the tax on your net business income, capped at $1,000 a year. It is applied automatically when you lodge and trims the tax bill directly — though it can't push you into a refund on its own.
Super is optional — but deductible
No employer pays super for you, so it's voluntary. But a personal concessional contribution is tax-deductible up to the $30,000 cap for 2026–27, lowering your taxable income while it compounds in the fund (taxed at just 15% inside). Lodge a Notice of intent to claim with your fund before lodging your return.
GST and PAYG instalments
Register for GST once your turnover reaches $75,000; it's reported separately on your BAS and isn't part of this income-tax figure (enter income excluding GST). Once you're established, the ATO usually collects your tax through quarterly PAYG instalments rather than one lump sum.
Frequently asked questions
Is there a separate sole trader tax rate?
No. Your profit is taxed at the same individual marginal rates as a salary. People searching for an "ABN tax rate" are really asking about the personal tax outcome on business profit after deductions — which is exactly what this tool shows.
Can I use the $1,000 trading-style offset and deductions together?
Australia doesn't have the UK's £1,000 trading allowance. Instead you deduct your actual expenses, and separately receive the Small Business Income Tax Offset (8% of tax on business income, capped at $1,000) on top.
Do I pay the Medicare levy on business income?
Yes. The 2% Medicare levy applies to your whole taxable income, including business profit, with a low-income shade-in at the bottom. High earners without private hospital cover may also pay the Medicare Levy Surcharge.
How is this different from a company?
A company is a separate taxpayer at a flat 25% or 30%, then dividends are taxed again to you (softened by franking credits). A sole trader is simpler — one return, personal rates — but every dollar of profit is taxed at your marginal rate the year you earn it.
Related
Educational estimate — not tax advice. Australia 2026–27 (ATO): resident rates 0% to $18,200, 15% / 30% / 37% / 45%; 2% Medicare levy with low-income shade-in; Low Income Tax Offset up to $700; Small Business Income Tax Offset 8% of tax on net small business income, capped $1,000 (aggregated turnover under $5m); deductible concessional super capped $30,000; Medicare Levy Surcharge 1–1.5% for singles over $101,000 without private hospital cover; HECS-HELP marginal repayments. The SBITO is estimated by apportioning income tax to business income; it ignores prior-year losses, PSI rules, GST/BAS, and the carry-forward super rule. Resident, single, claiming the tax-free threshold. Confirm with the
ATO or a registered tax agent.