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Tax guide: Calculating your taxable income

STEP 2 | Small business tax 101

Calculating your taxable income is essential to stay on top of your finances and avoid unexpected tax bills. Here, we’ll guide you through what counts as taxable income, how to estimate it, and the tax rates for 2024.

Key takeaways:

Understand what counts as taxable income
Estimate your taxable income accurately
Know the tax rates for 2024

How to Calculate Taxable Income as a Sole Trader

To file your taxes, you need to understand your taxable income – the money you earned over the past financial year minus any business expenses. This includes income from full-time, part-time, or casual employment.

For your first year after registering for an ABN, you’ll need to estimate your own taxes. After you’ve lodged your first income tax return, the ATO will begin sending you estimates of how much they expect you’ll earn. Always double-check these estimates, as they may not accurately reflect your actual income.

Sole Trader Tax Rates for 2024

Here’s a quick look at the tax thresholds for Australian taxpayers:

Taxable IncomeTax on this Income
$0 – $18,200Nil
$18,201 – $45,00019c for each $1 over $18,200
$45,001 – $120,000$5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000$29,467 plus 37c for each $1 over $120,000
$180,001 and over$51,667 plus 45c for each $1 over $180,000

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Tips for sole traders to Prepare Their Tax Returns and BAS

  • Estimate Your Income Automatically: Regularly estimate your income to avoid a large tax bill at the end of the year. Set aside money for taxes each quarter.
  • Track Expenses: Keep detailed records of all business expenses to reduce your taxable income.
  • Multiple Income Sources: It’s common to have both a job and a freelance business. Your employer manages tax payments for your job, but you’ll pay tax on your freelance income. Report all income on your annual tax return and make quarterly PAYG instalments for your freelance income.
  • Overestimate Taxes: When estimating your taxes, it’s better to overestimate. This way, you’re more likely to get a refund instead of owing money. Try using your gross income (before deducting expenses) for a conservative estimate.
  • Make your own estimates:
    • For Sole Users: Your Sole dashboard helps you track income and expenses. Use custom reports to estimate your taxable income.
    • For Non-Sole Users: Use your invoices, bank statements, and receipts to estimate your earnings and expenses. Consider starting a free trial with Sole to simplify this process.

With Sole, you can simplify tax season with automatic tax estimates, GST tracking, instant reports, and more. Our partnership with Accountants Direct ensures you have access to expert advice, making tax time a breeze.

Disclaimer

This guide is for informational purposes and doesn’t constitute financial advice. Consult a tax professional for advice tailored to your circumstances.

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