ABN Tax Calculator Australia 2026-27
Running your own business? See what you owe and what you can claim.
Calculate income tax for ABN holders and sole traders using 2026-27 ATO rates. Includes Medicare levy, LITO offset, GST obligations, PAYG instalments, and effective tax rate.
2026-27 ATO individual rates. ABN holders taxed at same progressive rates as employees.
Select the question that matches where you are right now.
Your result shows estimated income tax on your ABN taxable income — revenue minus deductible expenses. ABN holders are taxed at the same progressive individual rates as employees, plus the 2% Medicare levy. The Low Income Tax Offset (LITO) reduces tax for incomes under $66,667.
Adjust revenue and expenses to model different scenarios. Switch to Standard mode to include super contributions and see your PAYG instalment estimate. Advanced mode shows full workings.
Not a tax return or formal ATO assessment. Offsets, levies, and surcharges (e.g. Private Health Insurance, HELP debt) may vary your actual liability. Always lodge a proper tax return.
Uses the current ATO tax scale: 15% rate from $18,201 (cut from 16% on 1 July 2026); 30% rate from $45,001 (replaced the former 32.5% under the Stage 3 cuts). Calculator uses 2026-27 thresholds.
The single biggest driver of your tax bill is taxable income — revenue minus deductions. Every dollar of legitimate deductions reduces this at your marginal rate.
Your marginal rate applies only to the last dollar earned. Your effective rate is total tax ÷ total income — typically much lower. At $80k taxable income, effective rate is ~20% even though marginal rate is 30%.
A $10,000 deduction saves $3,000 at the 30% rate but $4,500 at the 45% rate. The higher your income, the more valuable every deductible expense becomes.
Personal super contributions are deductible up to the concessional cap ($32,500 for 2026-27). Contributing $10,000 to super saves $3,000 in income tax at the 30% rate — the contribution is taxed at only 15% inside super, creating a 15% tax arbitrage for middle-income earners.
Legally reducing your tax bill comes from maximising deductions, structuring super contributions, and (at higher incomes) considering a company structure.
Use the ABN Expenses Calculator to ensure you're claiming home office (70c/hr), vehicle (91c/km), phone, subscriptions, and equipment. Most sole traders under-claim by $3,000–$8,000 per year.
Contribute to super before 30 June and lodge a Notice of Intent with your fund to claim the deduction. This is the single most tax-effective strategy for most sole traders earning above $45k.
A company pays 25% on retained profits vs your 37% marginal rate at $135k+. The difference can be significant — but company structure adds compliance costs and wage/dividend decisions. Discuss with a tax accountant.
Once you have an estimate of your tax position, these are the key next steps before and after lodging.
A common rule: set aside 30% of every invoice into a separate account. This covers income tax, Medicare, and GST if registered. Adjust based on your actual effective rate from this calculator.
Tax returns for individuals are due 31 October. If you use a registered tax agent, you may get an extension to May. Late lodgement incurs a Failure to Lodge penalty — $330 per 28-day period.
Use the ABN Expenses Calculator to maximise deductions before modelling your tax. Enter the result as your expenses figure here to see the full tax impact.
Sole trader and ABN holder income tax — same as individual rates
Same rates as individuals
ABN income (sole trader) is taxed at the same progressive rates as employee income. If you also have employment income, all income is combined. Rate: 0% on first $18,200, 15% on $18,201–$45,000, 30% on $45,001–$135,000, 37% on $135,001–$190,000, 45% above.
Tax-free threshold
You claim the $18,200 tax-free threshold through your tax return. Note: if you also have PAYG withholding employment, only one employer can deduct TFT — your side ABN income will have withholding at the full rate unless you adjust.
GST obligations for sole traders in Australia
Mandatory GST at $75,000 turnover
If your total annual GST turnover is $75,000 or more, you must register for GST. Once registered, you charge 10% GST on most supplies, claim GST credits on business expenses, and lodge BAS (Business Activity Statement) quarterly or annually.
Voluntary registration
You can register for GST voluntarily even below $75,000 — useful if your clients are businesses that can claim GST credits. Downside: adds administrative burden.
What expenses can ABN holders deduct from taxable income?
Deductible: home office costs (ATO fixed rate $0.70/hr or actual expenses), vehicle costs (logbook or cents-per-km method), equipment (immediate deduction up to $20,000 under small business rules), software subscriptions, marketing, professional development, phone/internet (business portion), accountant and legal fees, superannuation contributions (personal super deductions via Notice of Intent). Not deductible: private expenses, fines, entertainment (only 50% for certain meals).
How PAYG instalments work for ABN holders
When you enter the PAYG system
The ATO automatically enrols ABN holders in PAYG instalments when their year-end tax bill exceeds $1,000 (after credits) or their instalment income exceeds certain thresholds. From that point forward, you pay tax quarterly based on the prior year's tax, rather than in one lump sum at year-end.
Instalment options
| Option | How it works | Best for |
|---|---|---|
| Option 1: PAYG instalment amount | ATO calculates the dollar amount each quarter based on last year's tax. Pay the figure on your activity statement. | Steady income year-on-year |
| Option 2: PAYG instalment rate | Apply a rate (e.g. 8.5%) to your current quarter's gross business income. Pays more in busy quarters and less in slow ones. | Variable / seasonal income |
Quarterly deadlines
BAS/IAS quarters: 28 October (Q1), 28 February (Q2), 28 April (Q3), 28 July (Q4). Late lodgement attracts a Failure to Lodge penalty starting at $330. Variation: a registered tax agent extension is automatic and typically adds 4 weeks.
Varying the instalment
If your business income drops substantially, you can vary the PAYG instalment downward without penalty — as long as you don't underpay by more than 15%. Use the variation field in your activity statement.
ABN sole trader tax worked examples 2026-27
| Gross business income | Deductible expenses | Taxable income | Income tax + Medicare | Net after tax |
|---|---|---|---|---|
| $40,000 | $5,000 | $35,000 | $2,519 | $37,481 |
| $60,000 | $8,000 | $52,000 | $6,686 | $53,314 |
| $80,000 | $10,000 | $70,000 | $12,920 | $67,080 |
| $100,000 | $12,000 | $88,000 | $18,680 | $81,320 |
| $150,000 | $15,000 | $135,000 | $33,720 | $116,280 |
| $200,000 | $20,000 | $180,000 | $51,270 | $148,730 |
Assumes 2026-27 tax brackets including stage 3 cuts, Medicare Levy at 2%, no HECS, no Medicare Levy Surcharge. Above $75,000 you must also register for GST and remit 10% of GST-applicable revenue. Above approximately $100,000-$150,000, the company structure starts to become tax-competitive due to the 25% small-business rate.
Superannuation rules for ABN sole traders 2026-27
No mandatory super for yourself
Sole traders are not required to pay Superannuation Guarantee (SG) on their own income — SG only applies to employees. You can choose to make personal super contributions to build retirement savings, and these may be tax-deductible.
Tax-deductible personal contributions
Personal contributions up to the $32,500 concessional cap (2026-27) are tax-deductible if you lodge a Notice of Intent to Claim a Deduction with your super fund before lodging your tax return. The contribution is taxed at 15% inside super (better than your marginal rate above $45k).
Carry-forward unused cap
If your super balance is under $500,000, you can carry forward unused concessional cap space from the last 5 years. This is powerful for sole traders with variable income — bank a big deduction in a good year using accumulated cap space.
Government co-contribution
If your total income is under approximately $64,293 (2026-27 threshold) and you make a $1,000 non-concessional super contribution, the government adds up to $500 as a co-contribution. This is one of the highest-return tax benefits available to low/middle-income sole traders.
SG for any employees you have
If you employ anyone (even casually), you must pay SG at 12% (2026-27) on their ordinary time earnings — quarterly to their nominated super fund. Missing SG payments triggers the Super Guarantee Charge (SGC), which is not tax-deductible.
Sole trader, company, trust — which structure suits ABN earners
Sole trader (ABN only)
Simplest. No separate tax return — business income flows through to your individual return. Tax at marginal rates from 15% to 45%. Cheap to set up and maintain (free ABN, no ASIC fees). Best for: income under $100k, low risk of business liability, simple operations.
Pty Ltd company
Separate legal entity. Tax at 25% (small business under $50M turnover) or 30% (base rate). Profits can stay inside the company (retained earnings), distributed as dividends to shareholders, or paid as wages. ASIC annual review fee ~$330. Best for: income over $100k consistently, asset-protection needs, growth ambitions.
Discretionary trust
Trust earns income; trustee distributes to beneficiaries each year. Income tax follows the beneficiary's marginal rate. Useful for income splitting in families with mixed marginal rates. Trustee usually a corporate trustee (separate company). Complex to administer; consult a tax accountant.
Effective tax rate comparison
| Business profit | Sole trader tax | Pty Ltd (retained) | Pty Ltd (paid as wage) |
|---|---|---|---|
| $80,000 | $16,120 | $20,000 | $16,120 |
| $150,000 | $39,570 | $37,500 | $39,570 |
| $200,000 | $59,870 | $50,000 | $59,870 |
| $300,000 | $106,870 | $75,000 | $106,870 |
Companies look better than sole traders only when profit exceeds approximately $180,000-$200,000 AND you can retain earnings inside the company. If you draw everything out as wages or dividends, sole trader is usually simpler and equivalent.
Common Australian ABN tax mistakes
Not setting aside tax money
Sole traders are paid gross — no PAYG withholding by clients (except no-ABN withholding at 47% if you don't supply your ABN). Set aside 25-35% of every payment into a separate tax account from day one. Many sole traders hit the end of year with a $20k+ tax bill they haven't saved for.
Missing the $75k GST threshold
The threshold is rolling 12-month, not financial year. Once your trailing 12-month income exceeds $75k, you have 21 days to register for GST. Many sole traders cross the threshold mid-year and only realise it at tax time — incurring backdated GST liability.
Claiming personal expenses as business
ATO audits regularly target home office, vehicle, and entertainment claims. Personal coffee meetings, gym memberships, family meals at restaurants — none of these are deductible regardless of how you frame them. Keep clear records distinguishing business from personal use.
Not lodging on time
Late lodgement of individual returns incurs $330 base penalty rising for repeat offenders. Tax agent extensions usually push the deadline to mid-May of the following year — well worth using if you're on cash flow tight.
Mixing personal and business banking
Operating a single bank account for both personal and business income makes ATO audits painful and time-consuming. A separate business account with linked accounting software (Xero, MYOB, QuickBooks) saves hours and reduces audit risk.
❓ Frequently askedFrequently asked questions about ABN tax
How do I pay tax on ABN income?
ABN holders pay tax at year end via their individual tax return. If your tax bill exceeds $1,000, the ATO enters you into the PAYG instalment system — quarterly prepayments based on prior year tax. First year: you file and pay the full amount in one go when you lodge (typically April–October for tax year ending June 30).
Should I structure as sole trader or company?
Sole trader: simple, no separate tax return, tax at marginal rates. Company: 25% flat tax rate for small businesses (turnover < $50M), but wages to yourself are taxable income, and distributing profits as dividends also has implications. Companies work best when income regularly exceeds ~$100,000+ and you can retain earnings in the company. Consult a tax accountant.
When do I need to register for GST?
You must register for GST when your annual GST turnover exceeds $75,000 (or $150,000 for non-profits). Below the threshold, GST registration is voluntary. Taxi and rideshare drivers must register regardless of turnover. Once registered, you charge 10% GST on most sales and claim GST credits on business purchases.
Do I need an ABN to work as a freelancer?
Yes — if you're providing services as a contractor or running a business. Without an ABN, your clients must withhold 47% PAYG from payments to you. An ABN is free to apply for via the ATO's Australian Business Register and typically issued within 24-48 hours.
What's the difference between an ABN holder and an employee?
The ATO and Fair Work Commission look at the substance of the relationship: control, integration into business, ability to subcontract, ownership of tools, hours, risk. Genuinely independent contractors hold ABNs and invoice for services. "Sham contracting" — treating an employee as a contractor to avoid super and entitlements — is illegal and exposes the business to substantial penalties.
Can I claim my home office as a sole trader?
Yes — either the ATO fixed rate method ($0.70/hour for 2024-25 onwards, covering electricity, internet, phone, depreciation of furniture) or the actual cost method (track and apportion actual expenses by business-use percentage). Keep records showing the hours worked from home or the business-use proportion.
What is the instant asset write-off for sole traders?
Small businesses with turnover under $10M can immediately deduct depreciable assets costing less than $20,000 (per asset) acquired and first used between 1 July 2024 and 30 June 2025. From 1 July 2025, the threshold is currently legislated to drop back to $1,000 unless extended. Multiple assets can each be written off as long as each is under the threshold.
How do I pay myself as a sole trader?
You don't formally "pay yourself" — you draw money from the business as needed. Drawings are not tax-deductible expenses. All business profit is taxable at your marginal rate regardless of how much you actually withdraw. Keep accurate books separating personal drawings from business expenses.
Do I pay super on my own ABN income?
Not mandatory — Superannuation Guarantee applies only to employees, not sole traders earning their own ABN income. However, voluntary personal super contributions are tax-deductible up to the $32,500 concessional cap and taxed at 15% inside super (a great deal if you're in 30%+ marginal bracket).
Can I claim car expenses as a sole trader?
Yes — either the cents-per-km method (91c/km for 2026-27, capped at 5,000 km/year, no logbook needed) or the logbook method (full actual costs apportioned by business-use %, requires 12-week logbook every 5 years). Logbook usually wins above 30% business use.
What records do I need to keep for ABN tax?
Income: all sales invoices and bank deposit records. Expenses: receipts (digital or paper), card statements, supplier invoices. Vehicle: logbook (if using logbook method), odometer readings. Home office: hours diary or square-metre apportionment. The ATO requires records for 5 years after lodgement.
Will the ATO audit me as a sole trader?
Random audits are rare. Targeted audits are more common — triggered by ATO data-matching with banks, ASIC, PSI rules, and benchmarking against industry peers. Common triggers: very high deductions relative to income, large bank deposits unmatched to declared income, unusual home office or car claims, or operating in high-risk industries (cash businesses, building trades).
Where these figures come from
Every threshold and tax rate on this page is taken from the Australian Taxation Office (ATO) — the source of record for Australian income tax, Medicare levy, HECS/HELP repayment, and capital gains tax.
- Individual income tax rates (2026–27, Stage 3) — ATO — Individual income tax rates.
- Medicare levy & surcharge — ATO — Medicare levy.
- HECS/HELP repayment thresholds — ATO — Study and training support loans.
- Capital gains tax rules — ATO — Capital gains tax.
- GST rules — ATO — GST.
- Tax offsets & LITO/LMITO — ATO — Tax offsets.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.