What is Sole Trader Tax Return and How to Calculate It In Australia?

You’re running your business in Australia as a sole trader, that’s simply great! Ironically, do you know that how to handle your taxing matters effectively? If your reply is no, today’s post can be of great help to you. The process might seem quite complex especially for beginners like you. The following write-up will acquaint you about how to file and maximize your Sole trader tax return in Perth favorably. This will prevent you from paying exorbitant taxes every taxing year in Australia.

Things every sole trader should know

The taxing criteria for full-time employees working for companies in Australia are way simpler as compared to others. An employee generally files the taxes by using the generated certificate obtained from his or her employer every year. On the contrary, as an entrepreneur or freelancer, you cannot access these group certificates from your employer. Sole traders in Australia are required to lodge certain forms of **Sole trader income tax return effectively. Considering that factor, here are the key aspects which every sole trader in Australia must become aware of.

  • The crucial tax deadlines
  • The calculation of the expenses which are deductible from your taxable income
  • Producing your Business Activity Statement (BAS)
  • Attaining the basic understanding of Goods and Services Tax (GST)
  • On-time payment of the PAYG installments and
  • Effective calculation of your Australian income tax

As a sole trader, you should get familiar with these concepts imperatively. This will guide you about calculating and paying your lump-sum taxes timely and for a long period of time. Many sole traders also encounter the brunt of an out-and-out complex tax situation. If you’re also one of them, then, you can hire a tax consultant Perth Australia. Your tax consultant will assist you to remain tax-compliant as a sole trader in Perth, Australia.

Sole trader income tax calculation: A step by step guide

Although there are many taxing options for sole traders, it’s always better to move with simple ones. So, the simplest and the most notable tax for sole traders is the income tax. Income tax is basically the tax levied on the total income you glean from your business.

A brief introduction to taxable income

Taxable income is the sum of money which you earn from your goods and services during every financial year. It is not incurred by anymore GST later on except for your business expenses. Say for instance, your taxable income will be $81,750 if you’ve earned 100,000 and your total business expense is $18,250.

Pertinent tax rates for sole traders

Sole traders don’t need to get daunted by thinking that their tax rates are remarkably different. On the contrary, sole traders can pay the same tax rates like those of regular salary earners. Below are the relevant forms of taxable income and the taxes levied on them for sole traders in Australia:

  • $180,001 and over (taxable income)-$54,097 and 45c for $1 above 180, 000 (levied tax)
  • $90,001-$180, 000 (taxable income)-20,797 and 37c for each $1 above $90,000 (levied tax)
  • $37,001-$90, 00 (taxable income)-$3,572 and 32.5c for each $1 over $90,000 (levied tax)
  • $18,201-$37, 00 (taxable income)-19c for each $1 above $18,200 (levied tax)

This tax table has been formulated keeping the taxing year of 2020-2021 in mind. It applies to all the native and permanent Australian residents. So, now the question is how to calculate your sole trader tax in Perth? Well, it’s that easy!

All you have to do for that is to visit the official site of the ATO. There you will find a convenient tax calculator to calculate the taxes which you specifically owe. You just have to update your pertinent expenses and income over there and the tax calculator will automatically calculate your income-tax. This will get automatically updated on your company’s dashboard too.

A prominent example of sole trader income tax return

So, do you actually wish to learn how to calculate your sole trader income tax by using ATO’s tax-calculator? If so, then envisage that you’re a sole trader and you’re using the ATO tax calculator. Suppose you are anticipating an income of AUD130, 000 excluding GST during this taxing year with $10,000 required for business expenses. As the rules go, you need to deduct AU$10,000 from your income i.e. AU$130,000 which comes to AU$120,000. If that is the case, then you’ll be labeled as the fourth category tax-payer listed above.

Time to calculate your tax

So, before you Lodge tax return in Perth, you need to calculate it impeccably. According to the fourth category taxpayer stated above you are aware that you’ll owe $20,797. This is the basic rate any taxpayer falling under this category needs to pay. You can choose to make AU$25,000 more above the AU$90,000 threshold. In that case, you must pay 37c to the ATO pertaining to that particular sum. This amounts to AU$9,250 altogether which is again incurred by a total tax of AU$30,047. To get the finest assistance in this matter, hire an agent of Tax Return in Perth today!