Frequently asked questions
What is the difference between my gross income and my taxable income?
Your gross income is every dollar your business brings in before any costs. Your taxable income is what is left after you subtract your allowable business deductions (like equipment, travel, and marketing). You only pay tax on the profit, not the total sales.
Do I pay a different tax rate on my “side hustle” income?
No. In Australia, your business income is simply added to any other income you earned (like a TFN salary or bank interest). The total amount determines your tax bracket. However, because your employer has already taken tax out of your salary, your business income often feels like it’s being taxed “more” because it pushes you higher into the progressive tax brackets.
What are the resident tax rates for the 2025-26 financial year?
The 2024-25 “Stage 3” tax cuts remain in effect for the 2025-26 year. Here are the current thresholds (note these do not include the 2% Medicare Levy).
Why is my ATO estimate different from my actual earnings?
The ATO estimates your tax based on your previous year’s performance. If your business has grown significantly or if you’ve taken on more expenses, their estimate will be off. This is why using a real-time tracker like Sole is vital—it shows you what you owe based on today’s numbers, not last year’s.
Is it really better to overestimate my taxes?
Yes. As a peer-to-peer tip: it is much easier to manage a surprise refund than a surprise debt. By setting aside tax based on your gross income (before deductions), you create a “forced savings” buffer that protects your business cash flow during leaner months.