Paying Tax As A Sole Trader- All You Need To Know!
Paying Tax As A Sole Trader- All You Need To Know!
Are you planning to start a new business all on your own? If yes, it’s important to register yourself as a sole trader, which will also help in reaping tax benefits. Sole trader means you are running a business solely or just as one person, which also makes you the sole proprietor of a company. In such business, all profits and losses are your responsibility, and you are accountable for all legal formalities involved.
There are many benefits a sole trader can enjoy in terms of profits and growth. Also, filing taxes is a lot simpler compared to large businesses and multinational firms. Before filing out taxes, a sole trader must be aware of the tax slab rate, potential deductions, and tax claims he or she can apply for.
Here’s a brief overview of sole trader tax rates for 2021-22 (excluding the 2% Medicare levy):
- For taxable income of $0-$18,200, the tax paid is Nil.
- For $18,201 – $45,000, the tax paid is 19 cents for each $1 over $18,200
- For $45,001 – $120,000, the tax paid is $5,092 plus 32.5 cents for each $1 over $45,000
- For $120,001 – $180,000, the tax paid is $29,467 plus 37 cents for each $1 over $120,000
- For $180,001 and over, the tax paid is $51,667 plus 45 cents for each $1 over $180,000
Tax Paying Process For A Sole Trader
The PAYG (Pay-as-you-go) instalment system makes it simple for sole proprietors to pay their taxes. By using this method, they can pay their taxes on a quarterly basis rather than all at once. This move helps in saving money at the end of the fiscal year.
To begin with, choose an instalment amount to be paid every three months based on an estimate of the amount of revenue you anticipate earning as a sole proprietor.
Need professional assistance for filling sole trader taxes or help in setting up a sole trading business? Our expert tax accountants at KPG Taxation have years of experience in the accounting and taxation field and can make the entire process smooth and stress-free for you. For more information, schedule a consultation appointment today.
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