Resources/Tax 101

Tax 101 for self-employed Australians

Tax can feel like a foreign language. Here's the plain-English version, covering the basics every sole trader should know.

The words you'll keep hearing

ABN (Australian Business Number)

Your business's identifier. If you're working for yourself, you'll generally need one to invoice clients and register for GST.

Income tax

As a sole trader, your business income is taxed at the same marginal rates as personal income. The first $18,200 you earn each year is generally tax-free.

GST (Goods & Services Tax)

A 10% tax on most goods and services. You must register once your turnover reaches $75,000 a year, and then add GST to your invoices.

PAYG instalments

Pay-As-You-Go lets you pre-pay your expected income tax in instalments through the year, instead of one big bill at the end.

BAS (Business Activity Statement)

If you're registered for GST, you lodge a BAS (usually quarterly) to report and pay the GST you've collected.

Deductions

Costs you incur to earn your income, like tools, software, a home office or vehicle use, can reduce the tax you pay.

How it works, step by step

1
Set yourself up
Get an ABN, and register for GST if you're earning (or expect to earn) $75,000 or more a year.
2
Track income and expenses
Keep a record of every payment in and every deductible cost out. Good records are the whole game.
3
Set aside your tax
Put a portion of each payment aside so the money is there when tax and GST fall due.
4
Lodge and pay on time
Submit your BAS through the year and your tax return after 30 June, paying what you owe by the due dates.

The dates that matter

1 July

The Australian financial year begins.

Quarterly

BAS and PAYG instalments are typically due (28 Oct, 28 Feb, 28 Apr, 28 Jul).

30 June

The financial year ends. Time to tally up the year.

31 October

Individual tax returns are due if you lodge yourself (later if you use a registered agent).

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DISCLAIMER:This is general educational information only and doesn't take into account your circumstances. Thresholds, rates and dates can change. It isn't tax advice, for guidance specific to you, speak to a registered tax professional, or join Ledgix.