Sole Trader Tax Return


A sole trader is defined as someone who runs a business alone and in their own name.

It is the simplest and easiest form of business structure – with low cost startup and compliance costs.

Managing a sole trader business is also relatively easy, as costs and compliance are generally low.

However, as you remain personally responsible for business liabilities, being a sole trader is not good for asset protection.

As a sole trader, your tax return is lodged in your own name, i.e. as an individual.

And, while the setup and running of a sole trader entity is usually fairly simple, completing a sole trader tax return may be more complex than it first looks.

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For example, you will need to complete additional information about your income and expenses in the Business Worksheet.

Sole traders can also claim expenses related to running their business, as a deduction against their business income.

However, as a sole trader, you cannot pay yourself a wage or salary, as you trade in your own name.

In fact, any salary you do pay yourself will be treated as drawings.

Sole Trader Tax Rate


As a sole trader, you will pay tax at the personal income tax rate, with a tax-free threshold of $18,200.

Sole traders are also eligible for a small business income tax offset of up to $1,000, as well as a middle income offset of up to $1,080.

They can also usually claim a deduction for any contributions they make to their superannuation.

But remember, it is always best to get guidance from a sole trader tax accountant to help maximize the tax benefits and tax planning for your Business Tax Return.

At Tax Return Perth, we can help you plan the best tax outcome for the financial health of your business.


How to pay tax as a sole trader


First-year sole traders should always keep some money aside for taxes that can occur after their tax return is lodged.

Not budgeting for this can really restrict your cash-flow, and any delays in payment of taxes can also incur interest and possible action from the Australian Taxation Office (ATO).

Once you have lodged your first tax return as a sole trader, the ATO will determine your PAYG installments.

As a sole trader, you may be eligible to many small business concessions.

You can also offset your losses with income from other sources, but conditions apply.

Thus, it is always a good idea to seek appropriate advice from your tax accountant when lodging your sole trader income tax return.

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