Why use this calculator
Nobody withholds tax from a sole trader's income, so the whole bill arrives at once when you lodge, often more than a year after you earned the money. People who spend what lands in the business account and then meet a five figure assessment are common, and the ATO charges interest on debts left unpaid.
This calculator shows the tax your business profit really creates using the 2026-27 resident brackets, the low income tax offset and the Medicare levy, then applies the small business income tax offset that many freelancers forget to count. It also shows the deduction for personal super contributions, the share of each dollar of profit you should move to a tax savings account, the quarterly PAYG instalment you can expect, and whether your turnover means you must register for GST. That turns a once a year shock into a weekly habit.
How to use it
- Enter your business income for the year excluding GST, which your invoicing or accounting software shows as sales or turnover.
- Enter deductible business expenses excluding GST credits, taken from the same software or your bank statements.
- Add any other taxable income such as a part time salary, which your income statement in myGov shows.
- Enter the personal super contributions you plan to claim as a deduction, which your fund confirms once you lodge a notice of intent to claim.
- Choose whether you pay the Medicare levy, which almost every Australian resident does unless an exemption certificate applies.
What each result means
- Net business income
- Your business income minus deductible expenses. This is the profit the business adds to your personal tax return.
- Each extra $1,000 of super claimed saves
- The income tax and Medicare levy you would save this year by contributing and claiming another $1,000 of personal super. The contribution is then taxed at 15% inside the fund, and the cap room left is shown alongside.
- Turnover before GST registration is required
- How much more business income you can earn this year before reaching the GST registration threshold. Once you reach it you must register, charge GST on your sales and lodge activity statements.
- Taxable income
- Net business income plus other income, minus the personal super deduction. Your tax is worked out on this figure.
- Income tax before offsets
- Tax on your taxable income at the 2026-27 resident rates, before any offsets or the Medicare levy.
- Low income tax offset
- Up to $700 off your tax for lower incomes, reducing to nothing at $66,667 of taxable income.
- Small business income tax offset
- A reduction of up to $1,000 on the tax attributable to business income for sole traders with turnover under $5 million.
- Medicare levy
- Two per cent of taxable income for most residents, phased in gradually for low incomes.
- Total tax and Medicare levy
- What you will owe for the year after offsets, before any PAYG withholding from a salary or instalments already paid.
- Average tax rate
- Total tax as a percentage of taxable income, which is always lower than your top marginal rate.
- Share of profit to set aside
- The tax your business adds, as a percentage of its profit. Move this share of every payment into a separate account.
- Quarterly PAYG instalment (est.)
- About a quarter of the tax your business income creates, which is roughly what the ATO asks for each quarter.
- Take home after tax and super
- Business profit plus other income, minus total tax and the super you contributed, which is what you actually get to spend.
- GST registration
- Whether your turnover reaches the $75,000 threshold at which registering for GST becomes compulsory.
The formula
Net business income equals business income minus expenses. The super deduction is the smaller of your contribution, the $32,500 concessional cap and your income before it. Taxable income equals net business income plus other income minus the super deduction. Income tax uses the 2026-27 brackets. The small business income tax offset equals 16 per cent of tax on taxable income times net business income, after the super deduction, divided by taxable income, capped at $1,000 and only for turnover under $5 million. Total tax equals income tax minus the low income and small business offsets, plus Medicare levy.
How this number is used in practice
Most sole traders are surprised by the first year and the second year together. In the first year nobody asks for tax until you lodge. Once that first assessment shows business income, the ATO usually enrols you in PAYG instalments, so in the second year you pay last year's bill and quarterly instalments towards this year's at the same time.
Setting aside the percentage shown here from every invoice, in a separate account, is the simplest way to avoid that squeeze.
Personal super contributions are the most powerful legal lever a sole trader has. Every dollar you contribute and claim, up to the concessional cap, comes off your taxable income and is taxed at 15 per cent inside the fund instead of your marginal rate. The cap includes any employer contributions from a salaried job, and unused cap from the previous five years can sometimes be carried forward if your super balance is under $500,000. The small business income tax offset is smaller but automatic once you complete the business schedule correctly.
Worked examples
$110,000 of income, $20,000 of expenses, $10,000 personal super, no other income
Taxable income is $80,000, total tax including Medicare levy is $15,120 after the full $1,000 small business offset, and take home is $64,880.
$50,000 side business with $10,000 of expenses and a $30,000 part time salary
Taxable income is $70,000, total tax is $11,920 after the $1,000 small business offset, and GST registration is optional.
$250,000 consulting income, $40,000 of expenses, $25,000 super
Taxable income is $185,000, total tax is $52,220 with the offset capped at $1,000, and GST registration is required.
When people use it
- Working out how much of each invoice to move into a tax savings account
- Estimating your first year tax bill before you lodge
- Checking whether your turnover means you must register for GST
- Testing how much tax a personal super contribution saves before 30 June
- Comparing take home pay as a sole trader with a salaried job
Tips
- Open a separate savings account and move the set aside percentage from every payment the day it arrives.
- Lodge a notice of intent to claim with your super fund and get its acknowledgement before you lodge your return, or the deduction is refused.
- Register for GST within 21 days of expecting turnover to reach $75,000. Register late and you can owe GST you never charged.
- The small business income tax offset is claimed on the business schedule of your return. Make sure business income is labelled correctly so it is calculated.
- Keep receipts for five years. Home office, phone and vehicle claims need a record of the business use percentage.
- If you expect income to fall, you can vary your PAYG instalments rather than overpaying for the year.
What it assumes, and where it stops being accurate
- Rates are the 2026-27 resident income tax brackets, low income tax offset and Medicare levy from the shared tax tables.
- The small business income tax offset is 16 per cent capped at $1,000, and the whole super deduction is treated as reducing net small business income.
- Personal super deductions are limited to the $32,500 concessional cap, assuming no employer contributions and no carried forward unused cap.
- A business loss is shown but not deducted against other income, because the non commercial loss rules often defer it.
- The Medicare levy surcharge, HELP repayments, tax already withheld from a salary and any GST payable are not included.
Terms used on this page
- Net business income
- Business income minus the deductions that relate to earning it, which is added to your personal taxable income.
- Small business income tax offset
- A tax reduction of up to $1,000 on tax attributable to business income for businesses with turnover under $5 million.
- PAYG instalments
- Quarterly prepayments of income tax on business and investment income, set by the ATO from your last return.
- Concessional contribution
- A super contribution that is taxed at 15 per cent in the fund, including deductible personal contributions.
Questions people ask
- How much tax does a sole trader pay in Australia?
- A sole trader pays personal income tax on net business income plus any other income, at the same resident rates as an employee, plus the 2 per cent Medicare levy. There is no separate business tax rate. The small business income tax offset reduces the tax on business income by up to $1,000 a year.
- What is the small business income tax offset?
- It is a reduction of 16 per cent of the income tax attributable to your net small business income, capped at $1,000 a year. It applies to sole traders and individuals receiving business income through partnerships or trusts, where the business turnover is under $5 million. It is worked out from your business schedule.
- When must a sole trader register for GST?
- When GST turnover reaches or is expected to reach $75,000 in a year. Taxi and ride sourcing drivers must register from their first dollar. Once registered you add 10 per cent GST to taxable sales, lodge business activity statements and claim GST credits on business purchases.
- Can I claim my super contributions as a sole trader?
- Yes. Personal contributions are deductible up to the concessional cap of $32,500 in 2026-27, less any employer contributions. You must give your fund a notice of intent to claim and receive its acknowledgement before lodging, and the contribution is then taxed at 15 per cent inside the fund.
- What are PAYG instalments?
- They are quarterly prepayments of the tax on business and investment income. The ATO usually starts them after your first return shows enough business income. The amount is based on your last assessed income, and you can vary it if you expect this year's income to be lower.
Use this with
Sole Trader Tax Calculator answers one part of the question. These pick up where it stops: Salary After Tax Calculator, Australian Income Tax Calculator, Superannuation Calculator, Freelance Rate Calculator and Profit Margin Calculator.
Where these figures come from
Figures and rules on this page follow Australian law and ATO guidance.
- ATO: Tax rates for Australian residents. Income tax brackets for 2026-27
- ATO: Businesses and organisations. Small business income tax offset, PAYG instalments and GST registration
- business.gov.au. Government guidance on running a business as a sole trader
Sole Trader Tax Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.