As a sole trader your business profit IS your personal income — there is no separate company tax, and no PAYG is taken out for you. You report your profit on your individual return and pay at the personal rates. Here is how the brackets, offsets and Medicare actually land on a tradie income — with the numbers.
The 2025-26 resident rates
| Taxable income | Rate | Tax on that income |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 16% | 16c per $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 + 30c per $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 + 37c per $1 over $135,000 |
| $190,001+ | 45% | $51,638 + 45c per $1 over $190,000 |
Plus the Medicare levy of 2%. From 1 July 2026 the second bracket drops from 16% to 15% (legislated). Most tradies on $60k–$120k sit in the 30% band, so that cut only touches the $18,201–$45,000 slice — useful, not transformational.
The tax-free threshold is one per person — not per job
The $18,200 tax-free threshold is a single allowance across all your income. Wages, ABN profit and interest are added into one taxable income, and the threshold sits at the bottom. Example: $50k PAYG wages + $30k net ABN profit → you are assessed on $80k, with the threshold and brackets applied once. Claim the tax-free threshold at your main employer; your ABN income gets no separate threshold — which is exactly why the ATO puts you on PAYG instalments, so you are not hit with a lump-sum bill. See PAYG Instalments.
LITO — the low-income tax offset
Maximum $700 if taxable income is $37,500 or less; it tapers by 5c per $1 to $45,000, then 1.5c per $1 to $66,667, and is nil from $66,668. Applied automatically. With the threshold plus full LITO you earn about $22,575 before any net income tax. At tradie incomes it fades fast: roughly $100 at $60k, $0 by ~$80k, and nothing above $66,667.
Medicare levy — and the surcharge that catches single tradies
- Medicare levy: 2% of taxable income — almost everyone earning over ~$34,027 pays the full 2% (about $1,200 at $60k, $2,000 at $100k).
- Medicare Levy Surcharge (MLS): an EXTRA 1%–1.5%, but only if your income is over the threshold (singles ~$101k, families ~$202k) AND you do not hold private hospital cover. A single tradie around $100k+ with no hospital cover can cop it — and basic hospital cover is often cheaper than the surcharge.
The small business income tax offset
A sole trader (or someone with a share of partnership/trust small-business income) with aggregated turnover under $5M gets a 16% offset on the tax attributable to business income — capped at $1,000 a year, applied automatically. Worked example: business income $50k of $100k total; if $18,000 of tax is attributable to the business, 16% = $2,880 — but it is capped at $1,000.
What to set aside
No PAYG comes out for you, so set money aside as you earn. 20–30% of profit is a rough guide, but your real rate depends on total income — and remember the 2% Medicare on top.
Common mistakes
- Thinking each job or source gets its own tax-free threshold — it is one allowance across all income.
- Forgetting the 2% Medicare levy on top of the bracket rate.
- Getting caught by MLS around $100k+ with no private hospital cover.
- Spending the tax portion of your ABN profit.
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