As a sole trader, no one takes tax out of your income before it hits your account. Every dollar you earn lands in full, which feels great until the bill arrives and you realise a chunk of it was never really yours.
Setting money aside as you go is the single easiest way to avoid that shock.
A rough starting point
For most sole traders, putting aside 25 to 30 percent of every payment covers income tax with a bit of buffer. If you earn more, your marginal rate climbs and you'll want to lean toward the higher end. It's a rule of thumb, not a precise calculation, but it keeps you out of trouble.
Don't forget GST
If you're registered for GST, the 10 percent you collect isn't income. It belongs to the ATO. Keep it separate from your tax savings so you're not counting the same money twice.
Then there's PAYG instalments
Once you've lodged a return with business income, the ATO usually asks you to pre-pay next year's tax in quarterly instalments. It catches a lot of people off guard in their second year, when they're paying last year's bill and this year's instalments at the same time. Planning for it early makes it painless.
The simplest system that works
Open a separate savings account. Every time you get paid, move your tax percentage across immediately. Treat it as money that was never yours to spend. When your bill arrives, it's already sitting there.
The bottom line
The exact percentage depends on your income, your structure, and your deductions. But the habit matters more than the precision. Set aside a sensible amount from day one and tax time stops being something you dread. If you want a number tailored to your situation, that's a quick thing to work out together.
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