The answer: same rates, different collection
An ABN is an identifier, not a tax category. Sole trader profit (business income minus deductions) goes into the same individual tax return as any wages, and the ordinary resident scale applies to the combined total: nothing to $18,200, then 15%, 30%, 37% and 45% across the 2026-27 brackets, plus the 2% Medicare levy. The full scale, including the non-resident and working holiday maker versions, is on the 2026-27 tax brackets page.
Tax at three profit levels
Figures computed at 2026-27 resident rates with Medicare levy, assuming the ABN profit is your only income and no HELP debt:
| Sole trader profit | Tax + Medicare | Effective rate | Per quarter, once in instalments |
|---|---|---|---|
| $45,000 | $4,595 | 10.2% | $1,149 |
| $90,000 | $19,320 | 21.5% | $4,830 |
| $150,000 | $39,570 | 26.4% | $9,893 |
Note the effective rates: even at $150,000 the average take stays well under the top marginal rate, because the lower brackets apply to everyone. For your own profit figure, including HELP and super in the picture, use the sole trader tax calculator.
No withholding, so instalments instead
An employer prepays a wage earner's tax every payday. On an ABN, nobody does that for you: you invoice gross, bank gross, and owe the tax later. The first year usually ends in a single large bill at assessment. Then, once your return shows $4,000 or more of business income and a tax debt over $1,000, the ATO enrols you in PAYG instalments and the bill becomes four quarterly prepayments due 28 October, 28 February, 28 April and 28 July. The PAYG instalment calculator shows what those quarters look like at your profit level, and the wise move in year one is to bank that amount from every invoice before the ATO asks for it.
New sole traders pay nothing all year, then two bills close together: the first year's tax at assessment, plus the first instalments toward the second year. Setting aside roughly a third of profit from day one is the difference between a routine July and a payment plan.
What actually differs from wages
- Deductions come off first. You are taxed on profit, not turnover. Tools, home office, vehicle use for work and insurance all reduce the taxable figure before the rates apply.
- No employer super. The 12% guarantee does not exist for you; concessional contributions are your own decision and your own deduction.
- No leave, and tax is your admin. The rates match an employee's, the obligations do not. If you hire staff of your own, a separate registration applies, covered in registering for PAYG withholding.
Frequently asked questions
What is the ABN tax rate?
How much tax do I pay on an ABN?
Why did no tax come out of my ABN payments?
Do I get the tax-free threshold on ABN income?
How much should I set aside for tax as a sole trader?
Sources
Related resources
Sole Trader Tax Calculator
Your profit, your brackets, your bill
Open →PAYG Instalment Calculator
The quarterly prepayments on your profit
Open →Why You Got an Instalment Notice
The thresholds that pull ABN holders in
Open →
Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.