Freelancer and Self-Employed Tax in Australia
⚠️ Disclaimer: For general information only — not tax, financial, legal, or medical advice. Figures may be outdated or incorrect; tax rules change frequently. Verify important decisions with the CRA/IRS or a qualified professional (for health topics, a licensed healthcare provider). You use this information at your own risk.
The short answer
As a sole trader, you and the business are the same legal entity. You report your business profit on your personal tax return and pay tax at the individual marginal rates. The setup is light — but GST registration, record-keeping, and the no-ABN withholding trap catch out plenty of newcomers.
Getting set up as a sole trader
- Get a TFN. As an individual you already have (or can get) a Tax File Number — the business uses it too.
- Apply for an ABN. The Australian Business Number is free at abr.gov.au and takes only a few minutes. You quote it on every invoice.
- Register a business name if you trade under a name other than your own.
- Open a separate bank account for the business. Not a legal requirement, but it makes record-keeping dramatically easier.
The no-ABN withholding trap
This is the single most expensive beginner mistake. If you don't quote an ABN on your invoices, your clients are legally required to withhold 47% of what they pay you and send it to the ATO. Getting an ABN is free and takes minutes — this trap is entirely avoidable, so there is no reason to ever fall into it.
Paying income tax on your profit
- Your taxable profit (income minus deductible expenses) is taxed at the individual marginal rates — the 2025–26 resident brackets plus the 2% Medicare levy.
- Once you're established, the ATO typically moves you onto PAYG instalments: quarterly prepayments toward your annual tax bill, so you don't face one giant payment at year end.
- Common deductions: home office costs, equipment, vehicle expenses, professional development, insurance, and accounting fees. Keep a receipt for everything.
GST: the $75,000 threshold
You must register for GST once your turnover reaches $75,000 in any 12-month period. After registering:
- Charge 10% GST on your invoices
- Claim GST credits on your business purchases
- Lodge a Business Activity Statement (BAS) — usually quarterly
Rideshare and taxi drivers: you must register from the first dollar, with no threshold.
Superannuation for the self-employed
With no employer, nobody pays the 12% superannuation guarantee for you — contributions are entirely voluntary. Many self-employed Australians still contribute regularly because the contributions are generally tax-deductible (annual caps apply), and the money compounds in a low-tax environment until retirement.
Frequently asked questions
Sole trader or company — which should I choose?
Start as a sole trader: it's free, simple, and suits most freelancers. A company adds registration costs, separate tax returns, and compliance obligations. Get professional advice before switching structures.
Do I need an accountant?
Not legally required. It's worth the money once GST registration, PAYG instalments, or multiple income streams make your affairs complicated — and their fees are generally deductible.
A client says they can't pay me without an ABN. What do I do?
That's the withholding rule working as designed. Apply for your free ABN at abr.gov.au, quote it on the invoice, and the problem disappears.
Can I claim my laptop and phone?
Yes, to the extent you use them for work. Apportion private use honestly (for example, 80% work use means you claim 80% of the cost), and keep the purchase receipts.
Sources
- ATO — tax rates for Australian residents: https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents
- ATO — your tax return: https://www.ato.gov.au/individuals-and-families/your-tax-return
- ATO — businesses and organisations: https://www.ato.gov.au/businesses-and-organisations
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