The reason tradies get a nasty tax bill isn't usually that they earn too much — it's that the money came in, got spent, and nothing was set aside. As a sole trader there's no boss taking tax out for you; that job is now yours. The good news: a simple habit makes it painless.
The system: a second account and a fixed %
- 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?
For most full-time tradies, 25–30% of profit is a sensible buffer. But your real rate depends on your income, because Australia taxes you in brackets — the more you earn, the higher the rate on the top slice. As a sole trader you pay the standard individual rates (there's no separate business rate). For 2026–27:
| 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. (The lowest bracket was 16% in 2025–26 and drops to 15% from 1 July 2026.) Because only the top slice of your income is taxed at the higher rate, your average rate is lower than your bracket — which is why "set aside 30%" is a safe round number for many, but not a precise one.
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 →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 real profit to get a precise figure.
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 June 2026.