Most ABN Sole Traders find it tough to work out exactly how much tax they’ll need to pay. Most tax calculators are set up for permanent employees working PAYG jobs, and so aren’t accurate for self-employed contractors and freelancers.
At Hnry we decided to create our own tax calculator, specifically for sole traders. It will calculate out how much tax you’ll need to pay across the main tax types.
Key Taxes for the Self-Employed:
- Income Tax - Any self-employed income you earn will need to have Income Tax paid on it. ATO calculate your income tax rate by summing the total of all your sources of income (including PAYG/Salary jobs, together with self-employed income, investment income etc) and then applying their standard tax rates. The income tax rates for PAYG earners and self-employed individuals are exactly the same.
- GST - If you earn over $75,000 per financial year just from your self-employed income (i.e. not including any Salary/Permanent income) then ATO will require you to register for GST. When you are registered for GST, you will be required to charge your customers an additional 10% on top of the cost of your goods and services, and this 10% is payable to ATO whenever you file your GST returns. If you make business purchases, the GST on any business purchases will reduce the amount of the GST you’ve collected that will be payable to ATO. For more details on GST, check out our Guide to Contractor and Freelancer GST
- Medicare - Any income you make from self-employment is also subject to the 2% Medicare levy. If you also earn income from PAYG/Salary work, then you will already be making Medicare contributions as part of your PAYG taxes, and therefore any Medicare levies on your self-employed income will be in addition to that.
Note that if you earn more than $90,000 per year and don’t have an appropriate level of private patient hospital cover, you may also be liable for the Medicare levy surcharge (MLS).
- Student Loan - If you have an outstanding study or training loan (HELP, VSL, SFSS, SSL, ABSTUDY SSL, or TSL), and you are earning over the annual threshold of $46,620, then you will be required to make repayments on that loan. The repayment rate depends on your income, which includes any contracting and freelancing income, even if you also have a PAYG job at the same time.
Ready to find out how much tax you’ll need to pay? Just use our calculator below to get the totals 👇
DISCLAIMER: The figures provided above are indicative, and are solely based on the information provided
One of the worst parts about being an ABN sole trader is managing taxes. It’s a huge pain to calculate and set aside tax money throughout the year, especially if your income fluctuates from month to month.
That’s why we created Hnry - to take care of all the tax admin automatically for sole traders, so they never have to think about tax again!
If you’re interested in finding out how using Hnry could save you money, hassle and time, check out the links below.