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Sole trader & contractor tax

Your sole trader tax, in plain numbers

Turn your business turnover and deductible expenses into the profit you're taxed on, the tax you'd owe and the cash you actually keep — with a clear GST flag, your quarterly PAYG instalment and the super an employee gets that you must self-fund.

Your sole trader / contractor tax
Turn your business turnover and expenses into the profit you're taxed on, the tax you'd owe and the cash you keep — plus whether you need to register for GST. 2026-27, resident rates.

On $100,000 profit you'd pay $22,520 tax and keep

$77,480

in hand — an effective tax rate of 23% on your profit.

Profit

$100,000

Total tax

$22,520

In your pocket

$77,480

You must register for GST — your $120,000 turnover is over the $75,000 threshold. You'll charge 10% GST on sales and remit it (not included in the tax above).

A guide, not tax advice. Open the advanced panel for the full breakdown, your quarterly PAYG instalment, the super you must self-fund, and how you compare to the same pay as an employee.

Working under an ABN means nobody withholds tax for you. Invoices arrive whole, and a slice of each was never yours — you have to notice that yourself. The gap between what lands in your account and what you can safely spend is what catches new sole traders out.

This works that gap out from your turnover and expenses, then adds what a tax table won't: whether you've crossed the GST registration threshold, and how you compare with an employee on the same money, who gets super paid on top.

How this is calculated

  1. 1

    Turnover less expenses gives your profit

    Deductible expenses come off revenue and what's left is your profit. There's no separate business return and no company rate — that profit is your own income, taxed like a salary.

  2. 2

    A personal super contribution comes off next

    Anything entered as a deductible personal super contribution is subtracted from profit to give taxable income — the one lever here that changes your bill rather than describing it.

  3. 3

    Income tax and Medicare are applied to that figure

    Taxable income runs through the 2026-27 resident brackets one band at a time, and the 2% Medicare levy is added on top, phasing in gradually just above the low-income threshold.

  4. 4

    What you keep, and the two rates describing it

    Cash in hand is profit less income tax, Medicare and any super set aside. Total tax over profit is your effective rate; the marginal rate is what the next dollar of profit costs.

  5. 5

    Instalments, GST and the employee comparison

    The quarterly instalment is your estimated annual tax split into four. Turnover is tested against the $75,000 GST threshold, and the employee comparison adds 12% Super Guarantee less the 15% contributions tax.

What it assumes

  • Resident 2026-27 rates, with no HECS/HELP debt, no Medicare levy surcharge (private hospital cover is assumed) and no offsets beyond the brackets.
  • Business profit is treated as your only income. A salary or investment earnings would stack on top and push more of it into higher brackets.
  • GST sits outside the tax figures. The threshold is flagged, but GST collected on sales and credits claimed on purchases aren't modelled — that money passes through you.
  • Expenses are taken at face value: nothing tests deductibility, apportions private use of a car or home office, or applies depreciation and write-off rules.
  • The instalment is a flat quarter of estimated tax. Real ATO instalments follow your last lodged return, so they lag a growing business.
  • Personal super is assumed fully deductible and within the $32,500 concessional cap for 2026-27, with no carried-forward cap and no Division 293 tax.

Common questions

How much of each invoice should I set aside for tax?

The effective rate on your own numbers is the honest answer, and it's usually higher than people guess once Medicare is counted. Move that share into a separate account the day each payment arrives, and round up — a good year quietly lifts you into a higher bracket.

Why was my first tax bill so brutal?

In your first year there are no PAYG instalments, so a full year of tax falls due at once when you lodge. The ATO then starts quarterly instalments, so you can end up settling last year's bill and prepaying this year's together.

When do I have to register for GST?

Once annual turnover reaches $75,000 — gross turnover, not profit, so expenses don't keep you under it. From then you add 10% GST to sales, claim credits on business purchases and remit the difference. That money was never income, which is why it sits outside these figures.

Do I get super as a contractor?

Usually not, and that's the hidden pay cut: an employee on the same money gets 12% Super Guarantee on top. One exception matters — if you're paid mainly for your own labour, you may count as an employee for super and the hirer must pay it.

Would a company structure leave me better off?

There's no general answer, which is why this doesn't model one. Sole trader profit is taxed as personal income at your marginal rate; a company is a separate taxpayer with its own rate, lodgements and running costs — an accountant's question, not a calculator's.

Sources: ATO — tax rates for Australian residents · ATO — Medicare levy · ATO — registering for GST · ATO — key superannuation rates and thresholds · All data sources

See also: Take-home pay · Salary sacrifice · HECS / HELP · Boost my super

General information only, not financial advice. Figures are estimates based on the inputs and assumptions above and don't account for your personal circumstances. Confirm anything important with the relevant authority or a licensed adviser.