Sole Trader Tax Returns –  Guide To How To Complete Your Sole Trader Tax Return

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How do I do complete Sole Trader Tax Return and what can I claim?

While as a sole trader you enjoy doing things your way, when it comes to tax returns, you have to fall in line and file your taxes on time. If you are not up to date with lodging your sole trader tax return the process can be somewhat intimidating.

There are rules that ought to be followed. You also need to know what deductions you can claim and the paperwork you have to do. The purpose of this post is to get you up-to-date on the process of filing tax returns and deductions as a sole trader.


What are Your Tax Obligations as a Sole Trader?

Sole traders are required to pay tax just like every other individual or business. The only difference is your tax returns are the same as your personal income tax return. How much you pay each financial year will depend on how much you earn as well as the tax bracket determined by the Australian Taxation Office (ATO).

Regardless of how much your business makes, as a sole trader you must get a Tax File Number (TFN) as well as an Australian Business Number (ABN). You then need to submit an annual income tax return. If you earn $75,000 or more each year, you are required to register for Goods and Services Tax (GST) and submit a Business Activity Statement (BAS) quarterly.

Tax for sole traders is the tax that every sole trader has to pay. This taxation is handled on an individual tax return. Your business income will be entered as an individual income. This means the tax rates align with individual rates.


However, if your business earns more than $75,000 a year, you will need to pay different taxes. This is where the GST comes in. Getting a GST will affect your taxes significantly because your sales may be eligible for taxation if they fall under the GST territory. You also have to maintain tax invoices for all your sales. An accountant in Sydney can help you understand the impact of GST credits as well as offer the in-depth bookkeeping needed to allow you to get the best tax return.


If a business makes a profit of less than $75,000 annually, the sole trader tax return is the same as paying your own individual taxes. You don’t have to worry about the GST.


What Can You Claim as a Sole Trader?

Being able to know what you can claim can help avoid large tax bills when the tax time looms. The good news is there are several claims you can make as a sole trader including some unusual claims and industry-specific tax deductions. However, for you to be able to navigate all your tax requirements and claims, it is crucial that you work with a dependable bookkeeping and accounting service provider in Australia.


Allowable Deductions for Sole Traders

You can claim expenses that relate directly to the running of your business. According to the Australian Taxation Office, you can claim the following operating expenses in your personal tax return provided that your situation is effected by these rules;

  • Home Office Expenses

If you work from home you can claim costs relating to the running of heating, cooling and lighting. The claims can either be based on the proportion of the floor area your business occupies or a fixed rate of 52 cents per hour.

To be able to claim proportion of running costs, you are required to set aside an area of the house for your business. The area you set aside must have the character of a ‘place of business’. Once that is done, you can claim portion of the occupancy cost of mortgage interest, internet, rent, council rate, land taxes as well as contents insurance based on the area occupied by your business.

  • Mobile Phone

This is an often overlooked claim. If you use your mobile phone to contact customers or offer services, you are allowed to claim a portion of the data and time of your mobile phone bill as well as the Internet bill that was used for work.

  • Tools and Equipment

You are allowed to claim work-related tools and equipment as well as insurance on them. You can claim a phone purchase for work use, laptop and laptop accessories, tablet and computers, power tools, camera and camera accessories. Sole traders can also claim an instant write off of any asset that costs more than $30,000.

  • Purchase of Software

Do you have software that you have purchased or subscribed to in order to offer services? If you do, you can claim the software purchase fully as an expense. Some software like Adobe Creative Cloud are very expensive. Always keep the invoices.  

  • Motor Vehicle Expenses

You will be able to claim motor vehicle expenses if you travel from site to site or pick up supplies using your motor vehicle. Alternatively, if you use your home as the primary place of business, you can claim travel from the house to and from sites for work required purposes. Motor vehicle expenses can be calculated using the cent per kilometer method or the logbook method.

  • Work-Related Clothing Expenses

Do you wear protective or work specific clothing? You can file a claim for laundry expenses for up to $150. If you paid for the clothing yourself, the clothing can be deductible. Protective goggles, sunscreen and footwear are deductible too.

  • License and Registration Fees

If your line of business requires you to have specific checks done or requires you to be a member of an organization in order to practice, these expenses are deductible.

  • Advertising and Marketing Fees

Any expense incurred when advertising your services or when paying marketing costs is deductible.

  • Accounting Fees

All accounting fees, including the cost of working with an accountant in Sydney, are deductible.

  • Insurance

Insurance expenses like income protection and public liability are all deductible. You should, however, note that personal insurance like Life insurance and TPD are not deductible.

  • Eligible Donations

Any donation of more than $2 that is made to an eligible charity is deductible. Make sure you keep all the receipts if you donate to charity.

  • Bank Fees

Fees incurred to maintain a business bank account or a payment gateway are all deductible.

 Other operating expenses you can claim include:

  • Education and training expenses
  • Repairs and maintenance expenses
  • Depreciation on capital expenses

Additional and Unusual Claims

As a sole trader, you can prepay your expenses for a period of less than 12 months. Doing so attracts a tax deduction. As a sole trader you can prepay for subscriptions, training events, some business travel expenses as well as business asset repairs.  

Industry-specific Tax Deductions

The industry you are in will affect tax deductions. If you are a mechanic, for example, you can claim the cost of using your car to travel between work and home if you transport bulky tools and you don’t have a secure storage at your job site.  Generally travelling from to home to work is not an allowable deduction. 

What You Cannot Claim as a Sole Trader

You have to tread carefully when filing a claim so as to remain in the good books of ATO.

  • You cannot claim 100% of all expenses
  • If you don’t have a logbook, you cannot claim certain expenses if you use your car for business. If your claim is for 5,000 kilometers, you have to provide the ATO with details of business-related car usage
  • Meals, coffees and snacks are not tax deductible unless they were incurred on a business related overnight travel. You must provide receipts.
  • Bank statements and EFTPOS receipts are not enough. Receipts have to be provide.

Be a Strict Record Keeper

In order to make your work easier when the tax time comes and to take advantage of all deductions, you have to keep detailed financial records throughout the financial year. You should keep track of the following:

  • Sales records
  • Purchase and expense records
  • Bank records
  • Payments to contractors or employees (when you transition from a sole trader to a small business)

All asset sales or purchases must be accounted for properly. Keeping track of all your expenses, following the best bookkeeping practices and updating your bookkeeping in your system for your business activity statements and invoices using software will help stay organized.

Key Tax Dates

Delays in filing for tax for sole traders can lead to penalties. That is why you need to mark your diary so as not to miss the key tax dates.

  • Income tax return is due by the 31st of October every year.
  • BAS returns must be filed by the 28th day of the following month after the end of the quarter. If you are lodging them through a tax agent, you get an extra month.


Are you a sole trader in need of help with income tax return and calculating the tax deductions you are eligible for? The first thing you should do is speak with a reputable accountant in Sydney. An accountant will be able to answer any questions you may have and give you more details not covered in this post. Don’t struggel doing things on your own. Seek expert help.  Book an appointment by following the link.

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