Freelancer Tax in Australia: ATO myTax & Sole Trader Guide 2025-26

Working as a freelancer, sole trader, or independent contractor in Australia means you are running a business - which comes with real tax obligations and real tax advantages. You must lodge an annual income tax return with the ATO, may need to register for and remit GST, and are responsible for your own superannuation. This guide covers everything for the 2025-26 financial year (1 July 2025 to 30 June 2026).

Disclaimer: Australian tax law and ATO rates are updated annually. Always verify current figures at ato.gov.au or with a registered tax agent before lodging your return.

Are You a Sole Trader or Running a Business?

If you provide services as a freelancer or contractor and are not employed under a PAYG arrangement, you are most likely operating as a sole trader - the simplest business structure in Australia. Your business income is reported on your personal income tax return (not a separate company return), and you are personally liable for all business debts.

The ATO distinguishes between a hobby and a business based on factors including profit intention, commercial manner of operation, and regularity of activity. If you are genuinely running a business, you must register for an Australian Business Number (ABN) and lodge tax returns accordingly.

Getting an ABN

An ABN is essential for Australian freelancers. Without one, clients who pay you more than $75 are required to withhold 47% of your payment and remit it to the ATO. Register for free at abr.business.gov.au. You can register as a sole trader or under a business name.

2024-25 Individual Income Tax Rates (Apply to Business Income)

As a sole trader, your business profit is taxed at individual income tax rates (plus the 2% Medicare Levy). The following rates apply from 1 July 2024 following the Stage 3 tax cuts (which reduced the 32.5% rate to 30% and expanded the bracket thresholds):

• $0 – $18,200: Nil (tax-free threshold)
• $18,201 – $45,000: 19 cents per dollar over $18,200
• $45,001 – $135,000: $5,092 + 30 cents per dollar over $45,000
• $135,001 – $190,000: $32,092 + 37 cents per dollar over $135,000
• $190,001+: $52,442 + 45 cents per dollar over $190,000

Plus Medicare Levy: 2% on your taxable income (low-income reductions apply below certain thresholds). Verify 2025-26 rates at ato.gov.au as they may be updated.

PAYG Instalments

Once your tax liability exceeds a threshold (typically $1,000 after offsets), the ATO will enter you into the PAYG instalments system. You pay tax in quarterly instalments throughout the year rather than one lump sum at lodgement. The ATO calculates your instalment amount based on the previous year's income, but you can vary it if your current year income is significantly different.

PAYG instalment quarters for 2025-26:

• Q1 (Jul–Sep 2025): due 28 October 2025
• Q2 (Oct–Dec 2025): due 28 February 2026
• Q3 (Jan–Mar 2026): due 28 April 2026
• Q4 (Apr–Jun 2026): due 28 July 2026

GST Registration and BAS

You must register for GST once your GST turnover reaches or is expected to reach $75,000 in any 12-month period (or $150,000 for non-profits). Once registered, you add 10% GST to your invoices and lodge a Business Activity Statement (BAS) - usually quarterly - reporting the GST you collected and the GST credits you are entitled to claim on business purchases.

You may voluntarily register below $75,000 to claim GST credits on your business expenses - useful if you have significant input costs. Register at ato.gov.au or through a registered BAS agent.

Tax Lodgement Deadlines

• 31 October 2026: Individual tax return lodgement deadline for 2025-26 (if lodging yourself)
• Later (varies): If you use a registered tax agent, extended deadlines apply - often into March or May 2027 depending on your agent's lodgement program
• 21 days after quarter end: BAS lodgement and payment deadlines (generally)

Key Tax Deductions for Australian Sole Traders

1. Motor Vehicle Expenses

If you use your car for business (travel to clients, supplier visits, business errands - not home-to-office commuting), you can claim vehicle expenses using one of two methods:

• Cents per kilometre: A flat rate per business kilometre (88 cents/km for 2024-25; check ato.gov.au for the 2025-26 rate), up to 5,000 km per year. Simple and requires minimal records.
• Logbook method: Keep a 12-week logbook to establish your business-use percentage, then apply that percentage to actual vehicle running costs (fuel, insurance, registration, maintenance, depreciation). No kilometre limit, and usually yields a larger deduction for high-mileage drivers.

TaxSort's GPS mileage tracker automatically records every trip with date, distance, and start/end locations, making logbook compliance effortless throughout the year.

2. Home Office Expenses

The ATO offers two methods for home office claims:

• Fixed rate method: 67 cents per hour for each hour worked from home (current ATO rate; verify at ato.gov.au for any updates). Covers electricity, internet, phone, stationery, and computer consumables. You must keep a record of your work hours.
• Actual costs method: Calculate the actual business-use proportion of home expenses (electricity, rent/mortgage interest, internet) based on dedicated workspace floor area. More complex but can yield a larger deduction for those with a dedicated home office.

3. Phone and Internet

The work-related proportion of your phone and internet expenses is deductible. If you use your phone 60% for work, deduct 60% of the annual cost. Keep records showing how you calculated the work-use percentage.

4. Tools, Equipment, and Technology

Computers, software, tools, and equipment used for business are deductible. Assets costing less than the instant asset write-off threshold can be deducted in full in the year of purchase - check ato.gov.au for the current threshold, as it has changed significantly in recent years. Assets above the threshold are depreciated over their effective life using the diminishing value or prime cost method.

5. Professional Development and Education

Courses, workshops, books, and conferences that maintain or improve skills used in your current work are deductible. Training for a new career or profession is not deductible under self-education rules.

6. Business Insurance

Professional indemnity insurance, public liability insurance, and business property insurance premiums are fully deductible as business expenses.

7. Accounting and Tax Agent Fees

Fees paid to your accountant or registered tax agent for preparing your tax return and BAS are deductible. This includes TaxSort's subscription - it is a deductible business expense.

8. Marketing and Advertising

Website costs, Google Ads, social media advertising, business cards, and branding expenses are all deductible. Keep receipts using TaxSort - photograph each receipt and it is automatically filed under Advertising & Marketing.

9. Superannuation Contributions

As a sole trader, you are not legally required to pay yourself superannuation, but voluntary super contributions (concessional contributions) are deductible. For 2025-26, the concessional contributions cap is $30,000 per year (check ato.gov.au for the current cap). Contributions within the cap are taxed at 15% inside the fund - much lower than most individuals' marginal tax rate - making this one of the most tax-effective strategies available to self-employed Australians.

Lodge a Notice of Intent to Claim a Deduction with your super fund before lodging your tax return to claim the deduction.

10. Meals and Travel

Meals consumed while travelling away from home overnight for business purposes are deductible. Day-to-day meal costs are generally not deductible. Accommodation, flights, and transport costs for business travel are fully deductible.

Sole Trader vs Company: A Quick Note

At higher income levels (above roughly $120,000–$150,000 of business profit), incorporating as a Pty Ltd company may reduce your tax rate - the company tax rate is 25% for base rate entities (turnover under $50 million). However, company structure adds compliance cost and complexity. Speak to a registered tax agent or accountant about the right structure for your situation.

How TaxSort Supports Australian Freelancers

TaxSort is configured for ATO rules and myTax categories. The AI receipt scanner captures and categorises every business expense under the correct ATO expense type. The GPS mileage tracker supports both the cents per km and logbook methods. At tax time, export your full year as a structured summary - sorted by ATO category, with deductible amounts calculated - ready for myTax or your tax agent. Your subscription to TaxSort is itself a deductible business expense.

Bottom Line

The Australian tax system rewards self-employed individuals who keep good records. The ATO expects documentation for every deduction claimed. With TaxSort running in the background throughout the financial year, you arrive at 30 June with organised, audit-ready records - and every deduction you are entitled to already captured.

Download TaxSort free and start tracking today.