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5 tax tips for sole traders and 7 mistakes you need to avoid.

Say Goodbye to Tax Season Stress: Master Your Sole Trader Taxes with These Expert Tips!

Don't Dread Tax Time - Learn How to Maximize Returns and Get Ahead for the Next Financial Year


🟠 Sole Trader Tax Obligations

As a sole trader, you’re required to pay tax like any other business or individual. The rate you’ll pay is the same as a personal income tax return. The Australian Taxation Office (ATO) calculates your exact payment based on your annual income.

Report in your tax return:

  • Your business's income less any allowable business-related deductions you can claim

  • Your other income such as salary/wages (as listed on payment summary or income statement), dividends, and rental income, with deductions subtracted from it.

🟠 What is Sole Trader Tax?

Sole trader tax is a tax that any sole trader must pay, however, it’s important to remember that your sole trader business structure is taxed as part of your personal income because it is owned by you. As such, the tax rates will align with individual rates.

🟠 How is taxable income calculated as a sole trader?

For a sole trader, taxable income is calculated at the same rate as personal income. The ATO calculates the sole trader’s income tax by deducting allowable deductions from taxable income.

The result of this equation is the amount that the sole trader is liable to pay tax on.

The amount of tax you owe does not have to be calculated by you. The ATO will instead determine your tax liability and produce an assessment that will show how much you owe or how much money you will get back. Any PAYG instalments you make throughout the year will be automatically credited to you in the assessment.

🟠 How much can I earn as a sole trader without paying tax?

The tax-free threshold for sole traders is $18,200 in the 2019–20 financial year.


5 Tax tips for sole traders Tips to make tax time easier

1. Separate business and personal expenses

You'll be sure to take full advantage of any tax deductions by doing this. In the event that you must pay for a company-related expense in cash or with money from a personal account, make sure to keep track of the transaction by paying yourself back from your business bank account.

2. Know the rules around expense claims

If you are spending money on things that help you make money in your business, it will be either fully deductible or partially deductible.

3. Keep records right

Maintain accurate and complete records so you can monitor your numbers throughout the year.

4. Keep digital copies of work-related receipts

If you don't have a receipt for an expense, you can't claim a tax deduction for it.

These documents must be kept for a minimum of five years. In addition, it's best to have a digital backup in case of an audit because paper receipts deteriorate with time and are simple to lose.

5. Don't put off tax preparation (and filing) until the last minute.

It's usually better to start your tax planning long before June 30. This gives you access to a variety of tax reduction options that you otherwise might not be able to implement.

Even if a tax obligation is anticipated, Gascoigne advises sole proprietors to complete their taxes well in advance of the deadline.


Avoid these common sole trader tax-time errors

7 of the most common mistakes made by sole traders:

1. Failing to report all money received, which entails organizing your invoices and keeping up with BAS.

2. Making claims for non-business-related expenses

3. Not accounting for the private component of costs

4. Not maintaining a logbook, which may reduce your ability to make motor vehicle claims

5. Not claiming interest on business loans and loans for vehicles

6. Misrepresenting lease payments as loan repayments

7. Failing to declare expenses that were paid for out of pocket

Any business owner who has to complete their tax return at the end of the fiscal year may find it stressful. But don't worry; with a little forward planning and professional assistance, you can easily minimize your tax-time stress while maximizing your deductions.


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We understand the importance and significance of submitting your Tax promptly and with accuracy precision. Count on us to simplify your tasks. Reach out to us, and we'll ensure your reports is accurate and submitted on schedule. Your peace of mind is our priority!

Email or give us a call at (03) 8548 1843.

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