How much should a tradie set aside for tax?
Less than you've been told. The usual "set aside 25–30%" over-saves most solo tradies: on 2026–27 rates a $50,000 profit needs only about 13% put away for income tax, and you don't reach 30% until you're clearing around $200,000. The calculator works out your actual estimate from current ATO rates.
What % should I set aside?
Here's the honest version, not a round number. Only the top slice of each dollar is taxed at the higher rate, so your average rate, the one that matters for setting money aside, sits well below your bracket. Run the 2026–27 rates against real profit and the picture is clear:
| Profit (after expenses) | Set aside about |
|---|---|
| $30,000 | ~8% |
| $50,000 | ~13% |
| $80,000 | ~20% |
| $120,000 | ~24% |
| $160,000 | ~27% |
| $200,000 | ~30% |
Income tax plus the 2% Medicare levy on 2026–27 ATO rates, before HECS/HELP, tax offsets and your own deductions — the same basis as the calculator above, which does your exact figure. Rates checked against the ATO, 22 September 2026.
So treat 25–30% as a ceiling, not a starting point: fine if you'd rather over-save and enjoy the refund, but for most tradies it's money sitting idle that could be paying down the ute. Set aside your band, confirm it with the calculator, and re-check once a quarter.
How do I actually set the money aside?
A second account and a fixed %. As a sole trader there's no boss taking tax out for you, that job is now yours — and the reason tradies get a nasty bill isn't usually that they earn too much, it's that the money came in, got spent, and nothing was set aside. A simple habit makes it painless:
- Open a separate bank account just for tax.
- Every time a customer pays you, move your tax % straight across — before you get used to seeing it in your everyday account.
- At tax time, the money's already there. No scramble, no shock.
The rates this uses
A sole trader pays tax at the standard individual rates — there's no separate business rate; your profit is added to any other income. Resident rates:
| Taxable income | 2025–26 | 2026–27 |
|---|---|---|
| $0 – $18,200 | Nil | Nil |
| $18,201 – $45,000 | 16% | 15% |
| $45,001 – $135,000 | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| $190,001+ | 45% | 45% |
Plus the 2% Medicare levy once your income is over the low-income threshold (~$27,000). The lowest bracket drops from 16% to 15% on 1 July 2026, so the year toggle matters. Rates exclude any HECS/HELP debt and assume you're a resident with no other offsets.
Setting aside for quarterly tax — when PAYG instalments start
After your first profitable year the ATO moves you onto quarterly pre-payments, and you don't opt in, it happens automatically. For a sole trader the trigger is all three at once. $4,000 or more of instalment income on your latest return, over $1,000 tax payable on your latest assessment, and $500 or more of estimated tax. The letter arrives in your myGov inbox, and most people pay quarterly from then on. The quarters fall due 28 October, 28 February, 28 April and 28 July.
If you've been moving the percentage across every payday, those instalments are already sitting in the account. If you haven't, four bills a year hurt exactly the way one does.
Source: ATO, Starting PAYG instalments, read 3 October 2026.
Watch it move as you earn, not once a year
A percentage is a plan. What breaks it is the quarter where the number quietly changes and nobody re-runs it. Yamate keeps your put-aside estimate current against real income as it lands.
Track this in Yamate → Free to try · no card · sign in with a link, no password to rememberWant the job before it is advertised? Homeowners post their problems in Who Do I Call? Australia, our free Facebook group. Answer one well and you are the tradie they ring. Join, help out, and put your business in front of the people asking.
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FAQ
How much should I put away for tax as a sole trader?
Less than the usual 25–30% for most solo tradies: about 13% of a $50,000 profit, about 20% of $80,000, and 30% only around $200,000. 30% is a safe buffer, not a starting point; use the calculator with your real numbers.
Do I pay tax on the GST I collect?
No. GST isn't income — you're collecting it for the ATO and pay it back on your BAS. Keep GST separate from your tax set-aside so you don't double-count or get caught short.
When do I actually pay the tax?
You pay when you lodge your tax return after 30 June. Once you've been profitable, the ATO usually shifts you to quarterly PAYG instalments — money you've set aside along the way covers these.
More free tools for tradies
A general estimate for Australian resident sole traders. It ignores HECS/HELP, offsets, deductions beyond your stated expenses, and the Medicare levy phase-in. Tax rates change — confirm with the ATO or your accountant. Last updated October 2026.