As a rough rule, a sole trader tradie in Australia should set aside about 25 to 30 percent of profit for income tax. Profit means your income after business expenses, not your total invoices. If you are registered for GST, keep every dollar of GST you charge in a separate account on top of that, because GST is never your money to spend.
That is the short answer. Below is how it actually works, with a worked example.
Tax is on profit, not turnover
The number that matters for income tax is your profit: total income minus genuine business expenses (tools, fuel, materials, insurance, phone, accounting). You only pay income tax on what is left.
So the first job is to keep clean records of what you bring in and what you spend. Every invoice you send and every receipt you keep feeds this number.
A worked example on $90,000 profit
Take a sole trader with $90,000 of profit for the year (after expenses). Using the 2024-25 resident tax rates plus the 2 percent Medicare levy, the income tax works out to roughly:
- Nothing on the first $18,200
- 16 percent on income from $18,201 to $45,000, about $4,288
- 30 percent on income from $45,001 to $90,000, about $13,500
- Medicare levy of 2 percent on $90,000, about $1,800
That is roughly $19,588 in total, or about 22 percent of the $90,000. Setting aside 25 to 30 percent gives you that bill covered with a buffer for a strong year, super, or a missed expense.
Want it done for your exact numbers? Use our free Tradie Tax Calculator to see what to put aside per job.
Where GST fits in
GST is separate from income tax and trips up a lot of tradies. The key points:
- You must register for GST once your turnover hits $75,000 in a 12-month period.
- Once registered, you add 10 percent GST to your invoices.
- That GST is not income. You are collecting it for the ATO and paying it across on your Business Activity Statement (BAS).
- The GST portion of a GST-inclusive invoice is one eleventh of the total.
The safest habit is a second bank account. Every time you get paid, move the GST out of reach so it is there when the BAS is due. Treat it as money that was never yours.
A simple system that works
- Open a separate savings account for tax.
- On every payment, move roughly 30 percent of the profit portion across for income tax.
- If you are GST-registered, also move one eleventh of the invoice across for GST.
- Leave it there until your tax return and BAS are due.
Do that on every job and tax time stops being a shock.
This is general information, not tax advice. Your situation, deductions, and any PAYG instalments change the numbers. Check the ATO website or talk to a registered tax agent.