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.
That's it. The only question is what % to use.
What % should I set aside?
Here's the honest version, not a round number. As a sole trader you pay the standard individual rates (there's no separate business rate), and 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. The 2026–27 rates:
| Taxable income | Tax rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Plus the 2% Medicare levy once you're over the low-income threshold (about $27,000). (The lowest bracket was 16% in 2025–26 and dropped to 15% from 1 July 2026.) Run those 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 below, 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.
Two things people get wrong
1. Don't set aside tax on the GST you collect
If you're registered for GST, the 10% you collect isn't income — it's the ATO's, and you pay it back on your BAS. Keep GST separate again, so you're not double-counting or short at BAS time.
2. Plan for PAYG instalments
After your first profitable year, the ATO usually puts you on PAYG instalments — pre-paying your tax in quarterly chunks. If you've been setting money aside as you go, these are already covered. If you haven't, they sting.
Yamate tracks your income & GST as you go, so tax time isn't a guess →Want 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
Should I put aside 30% for tax?
30% of profit is a safe buffer for many full-time tradies, but lower earners can set aside less and high earners may need more. Use the calculator with your expected profit to get a more tailored estimate.
Do I set aside tax on my whole invoice?
No — set aside the % of your profit (income minus expenses), and keep any GST you collected separate again, because that's not your money.
When do I pay the tax?
When you lodge your return after 30 June. Once you've been profitable, the ATO usually moves you to quarterly PAYG instalments, which your set-aside covers.
Related
Do I need to register for GST? · How to get an ABN
General information for Australian resident sole traders, not tax advice. It ignores HECS/HELP, offsets and your specific deductions. Rates change — check the ATO or your accountant. Last updated September 2026.