What are the tax rates for income?
As a sole trader, you pay the same tax as individual taxpayers, at individual income tax rates. The tax-free threshold is $18,200 for both sole traders and individuals. The rates can change from time-to-time, so it’s important to know what the rate is for the income year you’re reporting on. See individual income tax rates.
The following rates for 2018-19 apply from 1 July 2018:
|Taxable income||Tax on this income|
|0 - $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $90,000||$3,572 plus 32.5c for each $1 over $37,000|
|$90,001 – $180,000||$20,797 plus 37c for each $1 over $90,000|
|$180,001 and over||$54,097 plus 45c for each $1 over $180,000.|
Note: The above rates do not include the Medicare levy of 2%.
After your first year in business, you must lodge a tax return. You’ll generally pay quarterly Pay As You Go (PAYG) instalments that go toward the amount of income tax you will have to pay at the end of the year.
- have an annual aggregated turnover of less than $25 million (this increased to $50 million from 1 July 2018), and
- 80% or less of your assessable income must be base rate entity passive income (such as interest, dividends or rent).
There is no tax-free threshold for companies - you pay tax on every dollar the company earns. The company tax rates and lower company tax rate can change, so it’s important to know what the rate is for the income year you’re reporting on.
Although the company tax rate is 30% (or 27.5% for base rate entities) and there is no tax-free threshold, the tax rate for companies is less than the highest rate for individuals.
Find out more
- Watch the Australian Taxation Office’s (ATO) video Working out your income tax: tax basics for small business to find out the difference in calculating tax for a sole trader and a company.
- Check the ATO website to learn more about the changes to company tax rates.