How to Lodge Your Sole Trader Tax Return in Australia: A Step-by-Step Guide

Tax time as a sole trader hits different. Unlike employees — where your employer handles most of the heavy lifting — you’re responsible for reporting your own business income, claiming deductions, and making sure the ATO gets the right numbers. The good news? It’s not as complicated as it feels, especially if you’ve kept reasonable records throughout the year.

This guide walks you through the entire process of lodging your sole trader tax return, from what you need before you start to what happens after you hit submit.

How sole trader tax returns work

Here’s the thing that trips people up: sole traders don’t lodge a separate business tax return. Your business income goes on your individual tax return, with an attached business schedule (the ATO calls it the “Business and professional items” section). Your business profit gets added to any other income you earn — employment income, investment income, whatever — and you pay tax on the total at your individual tax rates.

For the 2025–26 financial year, those rates are:

$0 – $18,200: No tax (the tax-free threshold)
$18,201 – $45,000: 16 cents per dollar over $18,200
$45,001 – $135,000: 30 cents per dollar over $45,000
$135,001 – $190,000: 37 cents per dollar over $135,000
$190,001 and above: 45 cents per dollar over $190,000

Plus the 2% Medicare levy on top. So if your sole trader business earned $80,000 in profit and you had no other income, you’d pay tax on $80,000 using these brackets — not a flat “business tax rate.”

What you need before you start

Gathering everything upfront saves you from that awful mid-lodgement scramble. Here’s your checklist:

Identity and access. You’ll need a myGov account linked to the ATO. If you haven’t linked them yet, you’ll need to verify your identity — the ATO will ask you to answer questions about your tax history.

Your ABN. You should already have this. If not, our guide on how to register for an ABN covers the process.

Income records. All your business income for the financial year — invoices issued, payments received, any cash income. If you use accounting software with bank feeds, this should already be tracked. If you’ve been using spreadsheets or shoeboxes… well, now’s the time to sort through them.

Expense records. Every business expense you plan to claim as a deduction. This includes receipts, bank statements, and records of how you calculated any split between business and personal use. Our tax deductions guide covers what you can and can’t claim.

PAYG instalment details. If you’ve been paying quarterly PAYG instalments throughout the year, you’ll need those amounts. The ATO usually pre-fills these, but it’s worth double-checking.

Private health insurance statement. If you have private health cover, your insurer sends a statement that the ATO uses to calculate any rebate or surcharge.

Any other income. Interest from bank accounts, dividends, rental income, employment income — all of it goes on the same return.

Step-by-step: lodging through myTax

Most sole traders lodge through myTax, the ATO’s free online system. It’s the most straightforward option if you’re doing it yourself.

1. Wait for pre-fill data (but not too long)

The ATO starts pre-filling your return from mid-July with data from employers, banks, health funds, and government agencies. Most data lands by late July or early August. Lodging too early means you might miss pre-fill information and have to enter everything manually.

That said, the ATO won’t have your business income — you need to enter that yourself from your own records.

2. Start your return in myTax

Sign in to myGov, go to the ATO section, and select “Lodge tax return.” You’ll go through a “Personalise return” step where you tell the ATO what types of income and deductions apply to you. Make sure you tick the box for “Business/sole trader income” — this is what triggers the business schedule.

3. Complete the business schedule

This is the section unique to sole traders. You’ll need to provide your business details including your ABN, business name, the industry your business operates in (you’ll pick from a list), and whether your business started, continued, or ceased during the year.

Then you’ll fill in the financial details. Business income is your total revenue — everything customers paid you during the year. Business expenses are your deductible costs. The difference is your net business income (or loss), which flows through to your individual return.

The key categories you’ll typically report include gross payments (total income before expenses), other business income, total business deductions, and your resulting net income or loss.

4. Claim your deductions

This is where good record-keeping throughout the year pays off. Common sole trader deductions include operating costs like tools, materials, and software subscriptions, vehicle expenses for business travel, home office costs (either 70 cents per hour worked from home under the fixed-rate method, or actual costs if you keep detailed records), phone and internet costs (business portion), insurance premiums, professional development and training, and accounting or tax agent fees from the previous year.

The golden rule: you can only claim expenses that are directly related to earning your business income, and you need records to prove it.

If an expense is partly personal and partly business — like your phone bill — you can only claim the business percentage. And you need a reasonable basis for that split, not just a guess.

5. Check for offsets and credits

myTax will automatically calculate things like the low-income tax offset and the small business income tax offset (which gives you up to $1,000 off your tax bill if your business turnover is under $5 million). You don’t need to apply for these — they’re worked out from the information in your return.

6. Review and lodge

Before you submit, myTax shows you a summary. Go through it carefully. Check that your total business income matches your records, your deductions look right, and any pre-filled information (bank interest, health insurance, PAYG instalments) is accurate.

Once you’re happy, lodge it. You’ll get a confirmation receipt, and if you’re owed a refund, it typically arrives within two weeks for electronically lodged returns.

When is it due?

If you’re lodging your own return, the deadline is 31 October. Miss it and you risk a failure-to-lodge penalty from the ATO.

If you use a registered tax agent, you generally get an extended deadline — often until 15 May the following year. This is one reason many sole traders use an agent, even for straightforward returns. It buys you time and gives you a safety net for mistakes.

One thing to note: if you owe tax from a previous year or have outstanding lodgements, you might not get the extended deadline. The ATO can require you to lodge by 31 October regardless.

Common mistakes to avoid

Forgetting to report all income. The ATO matches your reported income against data from banks, payment platforms, and your customers’ tax returns. If you invoice a business and they claim it as a deduction, the ATO knows you earned that money. Under-reporting income is one of the fastest ways to trigger an audit.

Claiming personal expenses as business deductions. That “business lunch” that was actually dinner with friends? The ATO is very specific about what counts as a business expense. When in doubt, leave it out — or ask your accountant.

Not keeping records for five years. The ATO requires you to keep records for five years from when you lodge your return. Digital records are fine (and easier to manage), but they need to be complete and legible. Our guide on ATO record-keeping requirements has the full breakdown.

Mixing up cash and accrual accounting. Most sole traders use cash-basis accounting — you report income when you receive it and expenses when you pay them. Say you’re a graphic designer like Priya, who invoiced a client $4,500 in late June but didn’t get paid until mid-August. Under cash accounting, that income falls in the new financial year — not the one she just lodged for. Getting this wrong can shift your tax liability between years.

Ignoring PAYG instalments. If the ATO has put you on PAYG instalments (quarterly pre-payments of your expected tax), those amounts reduce your final tax bill. If you forget to account for them, you might think you owe more than you do — or worse, you might not realise you’re behind on payments.

Do you need an accountant?

Not necessarily — but it depends on your situation. If your sole trader income is straightforward (one income stream, simple expenses, no employees), myTax is perfectly capable of handling your return.

Consider a tax agent if you have complex deductions like a home office, vehicle use, or asset depreciation, your business had a loss and you want to make sure it’s carried forward correctly, you’re unsure whether something qualifies as a deduction, or you simply don’t want to deal with it. If you’re wondering what that might cost, our guide on how much an accountant costs gives you a realistic breakdown.

Making tax time easier next year

The single biggest thing you can do is keep your books up to date throughout the year. When your income and expenses are tracked as they happen — not reconstructed from memory in October — lodging your return becomes a matter of reviewing numbers you already know are right.

Accounting software with automatic bank feeds and smart categorisation takes most of the manual work out of bookkeeping. Transactions come in, get categorised, and when tax time arrives, your profit and deductions are already calculated. No spreadsheet archaeology required.

If you’re also registered for GST, keeping your books current has a double benefit — your quarterly BAS practically prepares itself, and your end-of-year figures are already reconciled.

The goal is to turn tax time from a stressful scramble into a quick review. Get the systems right now, and future-you will be grateful.