Sole trader tax rate
There isn’t one — you’re taxed at personal marginal rates.
There is no separate sole trader tax rate in Australia. Your business profit is added to your other income and taxed at the same individual marginal rates anyone else pays, plus the Medicare levy. Only companies pay a flat company tax rate — a sole trader never does.
This is why lowering taxable profit through legitimate deductions matters more than hunting for a “business rate” that doesn’t exist.
Worked example
Two people each end up with $75,000 of taxable income — one from a salary, one from sole trader profit after expenses. They pay exactly the same income tax. The source of the income doesn’t change the rate.
Common mistake
Searching for a flat “ABN tax rate” and assuming it’s lower than employee tax. It’s the same scale — what differs is that nobody withholds it for you, so you set it aside yourself.
Grounded in ATO guidance. Figures last checked . General information, not tax advice.
Related terms
Marginal tax rate
The tax rate on your next dollar of income.
Sole trader
The simplest business structure — you and the business are one.
PAYG withholding vs PAYG instalments
One is tax you hold back for others; one is prepaying your own.
GST-Free vs BAS Excluded vs Input Taxed
Three ways a line can carry no GST — and three different BAS labels.
← Back to the full glossary.
Questions about this term
Sole trader tax rate: common questions
- Is there a lower tax rate for ABN income?
- No — there is no flat “ABN tax rate” and no separate sole trader rate. Business profit is added to your other income and taxed at the same individual marginal rates anyone else pays, plus the Medicare levy. Only companies pay a flat company tax rate; a sole trader never does.
- Do a sole trader and an employee on the same taxable income pay the same tax?
- Yes — two people each with $75,000 of taxable income pay exactly the same income tax, whether it came from a salary or from sole trader profit after expenses. The source of the income does not change the rate; what differs is that nobody withholds it for the sole trader.
- If the rate is the same, what should a sole trader focus on?
- Lowering taxable profit through legitimate deductions. Because the rate is fixed by the marginal scale, the number you can influence is the profit it applies to — which is why deductions matter more than hunting for a “business rate” that doesn’t exist. The income tax calculator on this site shows what a lower profit does to the bill.
- Why does a sole trader get a tax bill when an employee doesn’t?
- Because nobody withholds the tax for you. An employee’s tax comes out of each payslip; a sole trader is on the same scale but sets the tax aside themselves — or is placed on PAYG instalments to prepay it through the year. The bill is the same tax, arriving in one piece instead of many.
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