Accounting Services
Sole Trader & Freelancer Tax Made Simple and Straightforward
Self-employed in Australia?
We help sole traders understand their tax obligations, claim everything they’re entitled to, and stop leaving money on the table.
Sole Trader Tax in Australia: What You Need to Know
As a sole trader, you’re running your own business. From a tax perspective, however, your business income is treated as your personal income. This means you pay income tax at individual tax rates, manage your own GST obligations (where applicable), and are responsible for staying on top of your ATO requirements throughout the year.
The good news is that sole traders have access to a wide range of tax deductions that can help reduce taxable income. The challenge is understanding what you can claim, keeping the right records, and making sure you’re meeting your compliance obligations.
At La Brisa Advisory, we work with sole traders and freelancers across Australia, including consultants, coaches, designers, musicians, content creators and other self-employed professionals. We help with sole trader tax returns, tax advice, GST obligations, deductions and business structure reviews, giving you confidence that everything is being handled correctly.
Common Sole Trader Tax Mistakes
Being a sole trader is one of the simplest ways to start a business, but it’s also where we see some of the most common tax mistakes. Many sole traders either miss legitimate deductions, underestimate their tax bill, or continue operating under a structure that no longer suits their business.
Here are some of the most common sole trader tax mistakes we help clients avoid.
Not Setting Money Aside For Tax
Unlike employees, sole traders don’t have tax withheld from their income throughout the year. It’s easy to spend what arrives in your bank account and forget that a portion belongs to the ATO.
Setting aside money regularly can help avoid unexpected tax bills and make it easier to meet future PAYG instalment obligations.
Missing Legitimate Sole Trader Deductions
One of the biggest mistakes we see is sole traders underclaiming deductions simply because they don’t realise what’s available to them.
Depending on your industry, deductions may include home office expenses, professional subscriptions, software, vehicle expenses, equipment, training, phone and internet costs, and other business-related expenses. Keeping good records throughout the year is essential.
Using The Wrong Vehicle Claim Method
Motor vehicle expenses are one of the most commonly misunderstood sole trader deductions.
Depending on your circumstances, the logbook method may provide a larger deduction than the cents-per-kilometre method. Understanding which approach is most appropriate can make a significant difference to your tax outcome.
Staying A Sole Trader For Too Long
A sole trader structure works well for many businesses, particularly when starting out. However, as your income grows, it may be worth reviewing whether a company or trust structure is more suitable.
The right structure depends on your income, goals, asset protection requirements, and future plans. What works today may not be the best option in three years’ time.
What Can a Sole Trader Claim on Tax?
Vehicle & Travel
Car expenses for work-related travel — using the logbook method or cents per kilometre. Not commuting to a regular workplace, but travel to clients, suppliers, or job sites.
Home Office
If you work from home, you can claim a portion of your occupancy costs, internet, and phone. The ATO’s fixed rate method makes this straightforward to calculate.
Equipment & Tools
Computers, phones, instruments, cameras, tools — anything used to earn income. Instant asset write-off may apply depending on the cost and your circumstances.
Professional Development
Courses, subscriptions, books, memberships, and industry conferences that are directly related to your current work.
Business Operating Costs
Software subscriptions, insurance, accounting fees, bank fees, marketing, and website costs — all potentially deductible.
Superannuation
As a sole trader, voluntary super contributions can be tax deductible — a powerful tax planning tool that also builds your retirement savings.
Common Questions
What records do I need to keep as a sole trader?
The ATO generally requires sole traders to keep records for at least five years. This includes income records, expense receipts, bank statements, invoices, and documentation supporting any deductions claimed. Good record-keeping not only helps at tax time but also protects you if the ATO ever requests further information.
Do I need to register for GST as a sole trader?
GST registration is generally required once your annual turnover reaches $75,000. Below this threshold, registration is usually optional. Whether registering voluntarily makes sense will depend on your industry, clients, and future growth plans.
Sole Trader vs Company Tax — Which Is Better?
There is no one-size-fits-all answer. A sole trader structure is simple and cost-effective, while a company may provide tax planning opportunities, greater flexibility, and asset protection benefits. The best structure depends on your income level, future plans, and individual circumstances.
How Much Tax Should You Put Aside as a Sole Trader?
A common rule of thumb is to set aside approximately 25%–30% of your income for tax, although the right amount will depend on your income, deductions, GST obligations, and whether you’re paying PAYG instalments. Reviewing your position throughout the year can help avoid surprises when your tax return is due.
Do freelancers need an ABN?
In most cases, yes. If you’re operating as a freelancer and carrying on a business, you’ll generally need an Australian Business Number (ABN) to invoice clients and report your income correctly. Having an ABN also helps avoid PAYG withholding issues when working with businesses.