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Australia Sole Trader Tax Guide

Australian sole trader taxation. The guide covers: the sole trader structure — the 'sole trader' is the 'individual who operates the business as the 'sole owner' — the 'simplest business structure' in Australia; the 'sole trader' uses the 'TFN' (the 'Tax File Number') and the 'ABN' (the 'Australian Business Number') for the 'business activities'; the 'sole trader' is the 'individual' for the 'tax purposes' — the 'sole trader's business income' is 'included in the individual's tax return' (the 'personal tax return') and is 'taxed at the individual's marginal tax rate' (the 'progressive tax rates from 0% to 45% plus the 2% Medicare levy'); the 'sole trader' does NOT 'pay the corporate tax' (the 'company tax rate of 25% or 30% does NOT apply'); the ABN registration and the GST — the 'sole trader' must 'register for the ABN' if the 'annual turnover is $75,000 or more' (the 'ABN is required for the GST registration') or if the 'business is the 'ride-sourcing' (the 'Uber' or the 'Ola' — the 'ABN is mandatory'); the 'sole trader' must 'register for the GST' if the 'GST turnover is $75,000 or more' (the 'standard GST threshold'); the 'sole trader' needs the 'ABN to issue the invoices' (the 'tax invoices' with the 'ABN') and to 'claim the GST credits' (the 'input tax credits'); the deductions for the sole traders — the 'sole trader' can claim the 'business deductions' under the 'Section 8-1 of the ITAA 1997' for the 'expenses incurred in the ordinary course of the business': (i) the 'home office expenses' (the 'fixed rate of 67 cents per hour' or the 'actual cost method'), (ii) the 'vehicle expenses' (the 'cents per km method at 85 cents per km' or the 'logbook method'), (iii) the 'equipment and the supplies', (iv) the 'marketing and the advertising', (v) the 'travel expenses', (vi) the 'insurance premiums', (vii) the 'accounting and the legal fees', (viii) the 'bank fees', (ix) the 'telephone and the internet', (x) the 'rent and the utilities for the business premises'; the PAYG instalments for the sole traders — the 'sole trader' may be 'required to pay the 'PAYG instalments' (the 'pay as you go instalments') if the 'tax liability above $1,000' (the 'ATO issues the PAYG instalment notice'); the 'PAYG instalments' are the 'pre-payments of the expected tax' (the 'quarterly or the annual instalments'); the 'sole trader' can choose the 'instalment amount' (the 'ATO-calculated instalment' or the 'self-calculated instalment'); the superannuation for the sole traders — the 'sole trader' is NOT 'required to pay the super guarantee (the 'SG')' for the 'own super' (the 'SG applies only to the employees'); the 'sole trader' can 'make the personal deductible contributions' (the 'concessional contributions') to the 'super fund' to 'reduce the tax liability' — the 'personal deductible contributions' are 'taxed at 15%' in the 'super fund' and 'reduce the taxable income' of the 'sole trader'.

Sole Trader Structure

  • Simple structure: The 'sole trader' is the 'individual' — the 'business income is taxed at the marginal rate'.
  • ABN required: The 'ABN' is 'required for the GST registration' and the 'invoicing'.
  • GST threshold: The 'GST registration is required' if the 'turnover is $75,000 or more'.

For the starting business and the ABN registration, see our Starting a Business Guide →.

Deductions & PAYG

  • Business deductions: The 'home office, the vehicle, the equipment, the marketing, and the travel' are 'deductible'.
  • PAYG instalments: The 'quarterly pre-payments of the expected tax' — the 'instalments reduce the year-end tax bill'.
  • Super for the sole trader: The 'personal deductible contributions' to 'reduce the taxable income'.

For the business expenses and the home office deductions, see our Business Expenses Guide →.

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