How sole trader tax is calculated in Australia
As a sole trader your business profit is added to your personal income and taxed at the individual rates. From 1 July 2026 the second tax rate falls from 16% to 15%.
- Income tax using the 2026–27 resident rates below.
- Low income tax offset: up to $700, reducing as income rises and reaching zero at $66,667.
- Medicare levy: 2% of taxable income (low-income earners pay less or nothing).
Worked example
A freelancer with $95,000 of revenue and $8,000 of business expenses has a profit of $87,000.
| Tax | Amount |
|---|---|
| Income tax (after low income offset) | $16,620 |
| Medicare levy | $1,740 |
| Total | $18,360 |
That is an effective rate of 21.1% of profit, leaving $68,640 to take home. Each extra $100 of profit costs about $32 in tax at this level, so setting aside around 25% of every payment is a safe habit.
2026–27 resident tax rates
| Taxable income | Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
What this estimate leaves out
Assumes an Australian resident with no other income. GST (if you're registered) is separate from income tax. The Medicare levy surcharge (if you have no private hospital cover above the threshold), voluntary super contributions, HELP repayments and other offsets are not included, and the Medicare levy low-income reduction is simplified.