Sole Trader Tax Calculator Australia

Working out how much tax you owe as a sole trader in Australia can be confusing. You pay income tax at individual marginal rates on your business profit, plus the Medicare Levy, minus any offsets you're entitled to. This free sole trader tax calculator gives you an instant estimate for FY2025-26 based on the Stage 3 brackets that took effect 1 July 2024. Enter your revenue, deductible expenses, and any other income, and the calculator shows your taxable income, income tax, Medicare Levy, LITO offset, net tax, take-home pay, and effective rate.

Disclaimer: This calculator is a general estimate only based on FY2025-26 rules and does not include super contributions, HELP/HECS repayments, the Medicare Levy Surcharge, or the small business income tax offset. It is not tax advice. Consult a registered tax agent for advice specific to your circumstances.

This calculator uses the tax brackets, Medicare levy thresholds and LITO for the 2025-26 income year (1 July 2025 to 30 June 2026).

How sole trader tax works in Australia

As a sole trader, you do not pay tax as a separate business entity. Your business income goes straight into your personal tax return. The ATO taxes your business profit (gross income minus allowable deductions) at the same marginal rates that apply to individual residents. If you also have employment income, investment income, or other assessable amounts, all of it is added together to form your total taxable income before rates are applied.

This means your marginal rate on additional sole trader income depends on what you already earn from other sources. A freelancer who earns $40,000 from a part-time PAYG job and then generates another $40,000 in consulting fees does not pay the lowest rates on the consulting income. The second $40,000 sits on top of the first, which pushes part of it into a higher bracket.

The full calculation has three components:

1. Income tax: applied to total taxable income using the resident marginal brackets.
2. Medicare Levy: 2% of taxable income, with a shade-in zone for low earners.
3. Offsets: the Low Income Tax Offset (LITO) can reduce the income tax component but cannot create a refund.

FY2025-26 income tax brackets

These are the Stage 3 rates that took effect on 1 July 2024 and remain in place for FY2025-26. Stage 3 cut the 19% rate to 16% and the 32.5% rate to 30%, and raised the thresholds for the 37% and 45% rates to $135,000 and $190,000.

Note that these are marginal rates: only the income within each band is taxed at that rate, not your total income. Your effective rate (total tax divided by total income) is always lower than your marginal rate, because the lower brackets are taxed at lower rates first.

From 1 July 2026 (FY2026-27) the 16% rate falls to 15%, and it is legislated to fall to 14% from 1 July 2027. This calculator uses the FY2025-26 rates above.

Medicare Levy and the low-income shade-in

Most Australian residents pay a Medicare Levy of 2% on their taxable income. This is collected alongside income tax and reported on your tax return. As a sole trader you pay the Medicare Levy at the same rate as a PAYG employee. There is no separate self-employment levy or exemption.

For low-income earners the levy is reduced or removed entirely. These are the FY2025-26 thresholds for a single person:

• $28,011 or less: no Medicare Levy.
• $28,012 to $35,013: shade-in zone. The levy is 10 cents for each dollar above $28,011, so you pay less than the full 2% rate.
• Above $35,013: the full 2% applies to your entire taxable income.

The thresholds usually rise each year, and families and people entitled to the seniors and pensioners tax offset have higher ones. See the ATO Medicare Levy page for the full tables before lodging.

Note: higher earners who do not hold an appropriate level of private hospital cover may also have to pay the Medicare Levy Surcharge (1% to 1.5% depending on income). This calculator does not include the MLS. For FY2025-26 it applies to singles whose income for MLS purposes is above $101,000 (families above $202,000); see the ATO for details.

Low Income Tax Offset (LITO)

The Low Income Tax Offset reduces the income tax payable by low and middle earners. It is a non-refundable offset: it can bring your income tax down to zero, but it cannot create a refund, and it does not reduce the Medicare Levy.

For FY2025-26 the LITO works as follows:

• Up to $37,500: maximum offset of $700.
• $37,501 to $45,000: offset reduces by 5 cents for each dollar above $37,500 (falling from $700 to $325 at $45,000).
• $45,001 to $66,667: offset reduces by 1.5 cents for each dollar above $45,000 (falling from $325 to $0 at $66,667).
• Above $66,667: no LITO.

Sole traders with modest business income and no other income get the most from the LITO. A sole trader with $30,000 of taxable income, for example, pays $1,888 in income tax before the offset and $1,188 after the full $700 LITO, an effective income tax rate of about 4% before the Medicare Levy.

What this calculator excludes

To keep the estimate simple and fast, several items are not included. For many sole traders these exclusions matter, so review each one with your tax agent:

Concessional super contributions. Sole traders can claim a tax deduction for personal super contributions up to the concessional cap. For FY2025-26 the cap is $30,000. Deductible super contributions reduce your taxable income, which lowers your income tax and can increase your LITO. This is one of the most useful tax planning tools for sole traders. The cap is indexed to wages and rose to $32,500 from 1 July 2026 (FY2026-27), so confirm the current cap with the ATO or your super fund.

HELP / HECS repayments. If you have a study loan, compulsory repayments start once your repayment income is above $67,000 (FY2025-26). From 2025-26 the repayment is worked out only on the income above that threshold (15 cents for each dollar up to $125,000), and repayments are not deductible. This calculator ignores HELP.

Medicare Levy Surcharge. Singles whose income for MLS purposes is above $101,000 (FY2025-26) and who don't hold an appropriate level of private hospital cover pay an extra 1% to 1.5% on top of the standard Medicare Levy. Not included here.

Small business income tax offset. Unincorporated small businesses with aggregated turnover below $5 million may be eligible for an offset of up to $1,000 on the tax attributable to business income. The calculation is complex and this estimator ignores it.

Franking credits, rental income, and capital gains. This tool covers business income and one field for other income. It does not model investment income, capital gains tax, franking credits, or negative gearing.

Frequently asked questions

What are the tax brackets for sole traders in 2025-26?

Sole traders use the same individual resident tax brackets as PAYG employees. For FY2025-26 (Stage 3 rates): $0 to $18,200 at 0%; $18,201 to $45,000 at 16%; $45,001 to $135,000 at 30%; $135,001 to $190,000 at 37%; and $190,001 and over at 45%. These apply to your total taxable income, which includes both business profit and any other assessable income.

Do sole traders pay Medicare Levy?

Yes. Sole traders pay the Medicare Levy at the same rate as employees: 2% of taxable income. There is no concession or exemption for self-employment. The main relief for low earners is the shade-in zone (taxable income up to $35,013 for a single person in FY2025-26), which phases the levy in gradually rather than applying the full 2% from the first dollar.

Can I claim the Low Income Tax Offset as a sole trader?

Yes. The LITO is available to any Australian resident individual regardless of how their income is earned. If your total taxable income is below $66,667, you will receive some or all of the maximum $700 offset. The offset reduces your income tax (not the Medicare Levy) and is non-refundable: it can reduce tax to zero but cannot produce a cash refund.

Are super contributions deductible for sole traders?

Yes. If you make personal concessional contributions to a complying super fund and lodge a valid Notice of Intent to Claim, those contributions are deductible up to the concessional cap ($30,000 in FY2025-26, $32,500 from FY2026-27). Deducting super reduces your taxable income, which directly reduces income tax, may increase your LITO entitlement, and reduces Medicare Levy. This calculator does not model super. For a rough estimate of the impact, add your deductible super contributions to your business expenses, and ask your tax agent for a precise calculation.

Why is my effective tax rate lower than my marginal tax rate?

Your marginal rate is the rate applied to each dollar in the highest bracket you reach. Your effective rate is your total tax as a percentage of total income. Because the lower brackets are taxed at lower rates (including the tax-free threshold up to $18,200), your overall average is always lower than your marginal rate. For example, a sole trader earning $80,000 has a marginal rate of 30% but an effective rate of about 20.5% including the 2% Medicare Levy (18.5% on income tax alone), because the first $18,200 is taxed at 0%, the next $26,800 at 16%, and only the remaining $35,000 at 30%.

Do sole traders pay PAYG instalments?

Many do. The ATO automatically enters you into PAYG instalments when your latest tax return shows instalment income (gross business and investment income) of $4,000 or more, the tax payable on your latest notice of assessment is $1,000 or more, and your estimated (notional) tax is $500 or more. Instalments are usually paid every three months and go towards your income tax for the year, so you have a smaller bill at tax time. They are paid on your BAS or through an instalment notice. If your income fluctuates significantly you can vary your instalments. For help estimating your quarterly BAS obligations, see the BAS Quarterly Calculator.

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• Home Office Deduction Calculator
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• BAS Quarterly Calculator

Maximise your deductions with Taxr

Your net tax is only as low as the deductions you can claim. Every receipt you lose is a deduction you can't prove, and the ATO expects records for your business expense claims. With Taxr you photograph a receipt (or import a PDF) and it reads the vendor, date, total and GST in about 5 seconds, then suggests a category for you to confirm. At tax time, export an Excel or PDF summary by category for your accountant. The Excel file links to each receipt image.

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Last reviewed: 30 September 2026 (FY2025-26 figures). Tax law changes, so verify the current brackets, Medicare Levy thresholds, and LITO rules against the ATO before lodging. This estimator does not include super, HELP/HECS, MLS, or the small business income tax offset.