Your First Tax Return as a Sole Trader: What to Know Before You Start
New to working for yourself? A plain-English orientation to your first sole trader tax return in Australia — what’s different, what you’ll need, and the five things first-timers wish they’d known.
Just started working for yourself? Your first tax return as a sole trader feels bigger than it is — but it is genuinely different from the return you did as an employee, and the differences are where people trip up. This is the map: what changes, what you’ll need, and the five things first-timers usually wish someone had told them. It doesn’t cover every detail — each section points you to the specifics.
1. It’s the same return — with a business section bolted on
As a sole trader you don’t lodge a separate “business” return. You lodge the normal individual tax return, but with an extra business schedule where you declare your business income and claim your business expenses. Your ABN income and your deductions go there; the tax is then worked out on your total income. The big mental shift: no employer has been withholding tax from your business income during the year, so unlike a salary, the tax on it isn’t already paid — you settle it when you lodge.
2. You keep more of your own records now
As an employee, most of your tax information was pre-filled. As a sole trader, the responsibility shifts to you: what you earned through your ABN, and every business expense you want to claim, needs a record behind it. Bank statements, invoices, receipts. You don’t send these in — but if the ATO asks, you need to be able to show them. Starting a simple habit now (a separate bank account, keeping every receipt) makes your first return far less stressful than reconstructing a year from memory.
3. Your deductions are where the money is
This is the part that most changes your tax bill — and the part first-timers most often under-claim. As a sole trader you can claim the expenses of running your business: the work-related share of your home internet and phone, your car expenses, tools, equipment, subscriptions and more. Each has its own rules, so it’s worth knowing what applies to you rather than guessing — claim too little and you overpay, claim wrongly and it’s a problem.
4. Set money aside as you go — before the bill arrives
Because no tax was withheld from your business income, the bill lands in one hit at lodgement — and for a lot of first-timers, that’s a nasty surprise. The fix is simple: put a portion of every payment aside as you earn it. Our sole trader tax set-aside calculator gives you a rough percentage to stash. After your first year, the ATO will usually put you on PAYG instalments — pre-paying your tax across the year so it never builds into one lump again.
5. Two thresholds worth watching
Two lines can change your obligations as you grow. First, GST: once your turnover reaches $75,000 in a 12-month period, you generally must register for GST. Second, the business-or-hobby line: if what you’re doing is small and occasional, it may not be a business at all — which changes whether you declare it. If you’re not sure which side you’re on, the hobby-or-business guide walks through how the ATO decides.
When it’s due
If you’re lodging your own return, the deadline is 31 October. There’s no need to rush in early July — waiting until your income information is ready (usually late July) means fewer mistakes. If you use a registered tax agent, later deadlines generally apply, but you need to be on their books before 31 October.
Not sure how any of this applies to your situation? Ask Taxplain — plain-English answers based on public ATO guidance, in seconds. Free to start, no sign-up.
Frequently Asked Questions
Do sole traders lodge a separate business tax return?
No. A sole trader lodges the standard individual tax return, but completes an additional business schedule to declare business income and claim business expenses. The tax is calculated on your total income. This is different from a company, which lodges its own separate return.
Why do I owe tax at lodgement as a sole trader when I never did as an employee?
As an employee, your employer withheld tax from each pay throughout the year, so it was paid as you earned. No one withholds tax from your sole trader business income, so the tax on it isn’t paid until you lodge — which is why it arrives as a lump sum. Setting money aside as you earn, and later PAYG instalments, are how you smooth this out.
What records do I need for my first sole trader tax return?
You need records of your business income (invoices, bank statements) and of every business expense you claim (receipts, statements). You don’t submit these with your return, but you must be able to produce them if the ATO asks. A separate bank account and keeping receipts as you go makes this much easier.
When is my first sole trader tax return due?
If you lodge yourself, the deadline is 31 October. Lodging in late July (once your income information is ready) rather than early July reduces the chance of errors. If you use a registered tax agent, later deadlines usually apply, but you must be registered with them before 31 October.
Do I need to register for GST as a sole trader?
Only once your business turnover reaches $75,000 in a 12-month period — then registration is generally required. Below that, GST registration is optional. It’s separate from income tax and worth watching as your income grows.