✅ 2025–26 tax rates — verified

Tax is the biggest cost most tradies underestimate when they go out on their own. As an employee, your boss handled it. As a self-employed tradie, you're responsible — and if you don't set money aside, a surprise ATO bill can sink your business. Here's exactly what you'll pay, with real numbers.

📋 In This Article

  1. →2025–26 income tax rates
  2. →Worked examples by income
  3. →GST obligations
  4. →Superannuation
  5. →How to reduce your tax bill
  6. →How much to set aside

2025–26 Income Tax Rates for Sole Traders

As a sole trader, you pay income tax on your net profit (revenue minus deductions) at the same rates as individual income tax. There is no separate "business tax" rate for sole traders.

Taxable IncomeTax RateTax Payable on This Portion
$0 – $18,2000%Nil
$18,201 – $45,00019%19c per $1 over $18,200
$45,001 – $135,00032.5%$5,092 + 32.5c per $1 over $45,000
$135,001 – $190,00037%$34,342 + 37c per $1 over $135,000
Over $190,00045%$54,682 + 45c per $1 over $190,000

The 2% Medicare Levy applies on top of income tax for most Australians. The Low Income Tax Offset (LITO) reduces tax for lower earners.

Worked Examples — Tax at Different Tradie Income Levels

These examples show the approximate total tax bill for a sole trader tradie before claiming any deductions beyond the tax-free threshold. Your actual bill will be lower once you've claimed your tools, vehicle and other deductions.

Annual IncomeIncome TaxMedicare (2%)Total TaxEffective RateTake Home
$60,000$9,967$1,200$11,16718.6%$48,833
$80,000$16,467$1,600$18,06722.6%$61,933
$100,000$22,967$2,000$24,96725.0%$75,033
$120,000$29,467$2,400$31,86726.6%$88,133
$150,000$42,997$3,000$45,99730.7%$104,003

These are approximate figures. Always confirm with your accountant for your specific situation.

GST — The Tax Most New Tradies Forget

Once your annual turnover exceeds $75,000, you must register for GST. This means you collect an extra 10% on every invoice and send that to the ATO quarterly via your BAS.

The critical thing to understand: GST is not your money. If you invoice $11,000 including GST, only $10,000 is yours. The $1,000 belongs to the ATO. Spending it is how tradies end up in serious debt to the tax office.

Superannuation — Your Responsibility Now

As a self-employed tradie, nobody pays your super for you. The ATO strongly encourages self-employed people to make voluntary super contributions — and you can claim them as a tax deduction, which makes it one of the most powerful ways to reduce your tax bill legally.

Contributing $15,000 to super as a sole trader earning $100,000 saves approximately $4,875 in income tax (at the 32.5% marginal rate minus the 15% super tax). That's free money you're leaving on the table if you don't contribute.

How to Legally Reduce Your Tradie Tax Bill

The biggest legitimate deductions most tradies can claim:

  • Vehicle logbook — often $8,000–$15,000+ deduction for tradies who drive regularly
  • Tools and equipment — instant write-off for eligible items
  • Super contributions — deductible up to the concessional cap ($30,000 for 2025–26)
  • Insurance premiums — public liability, income protection, tools cover
  • Phone and internet — work-use percentage
  • Accounting fees — fully deductible
  • Training and licences — if related to your current work

→ See the full list of tradie tax deductions →

How Much to Set Aside for Tax

The practical rule for sole trader tradies: set aside 25–30% of every invoice into a separate account earmarked for tax. Keep it there. Don't touch it. Pay it to the ATO when your bill comes.

This covers income tax, Medicare levy, and leaves a small buffer. If you're in the higher income brackets or not claiming many deductions, go closer to 30%.

💡 Pro tip:

Open a separate bank account labelled "Tax". Set up an automatic transfer of 27% every time money hits your main account. Do this once, forget about it, and you'll never face an ATO surprise again.

Do tradies pay company tax or income tax?

Sole traders pay income tax at individual rates on their net business profit. Only companies (Pty Ltd) pay the company tax rate (25% or 30% depending on size). Most self-employed tradies operate as sole traders and pay income tax.

When do I have to pay my tax bill?

After you lodge your tax return, the ATO issues a notice of assessment. Once your tax debt exceeds a threshold, you'll be put on PAYG instalments — paying tax quarterly throughout the year rather than a lump sum. This is actually helpful for managing cash flow.

Can I pay less tax by paying myself a salary?

Not as a sole trader — you and your business are the same legal entity. If you operate as a company, you can potentially pay yourself a salary and have the remainder taxed at the company rate, but this involves significant setup cost and complexity. Talk to your accountant when you're earning $100,000+ net profit.