Sole Traders

Tax rates

In Australia, a taxpayer's income is taxed progressively. Broadly, this means that as you earn more income your average tax rate rises. Progressive taxation means that higher income earners pay more tax than lower income earners. This is achieved by taxing a range of income brackets as a set percentage or cents in the dollar. These income brackets are called tax brackets. The following tables detail the tax brackets of our progressive tax system for the financial years ending 30 June 2005 and 30 June 2006. The rate of tax within these brackets is called the marginal rate of tax. For Australian residents, the first tax bracket, from $0 to $6,000, has a zero marginal rate of tax. Tax is applied to every dollar after this figure. This tax-free amount is called the tax-free threshold.

These rates apply to individuals who:

• are residents of Australia for tax purposes for the whole financial year (see Residency - overview for more information), and
• did not leave full-time education for the first time during the financial year.

Tax Rates 2004-05

Taxable income	Tax on this income
$0 – $6,000	Nil
$6,001 – $21,600	17c for each $1 over $6,000
$21,601 – $58,000	$2,652 plus 30c for each $1 over $21,600
$58,001 – $70,000	$13,572 plus 42c for each $1 over $58,000
Over $70,000	$18,612 plus 47c for each $1 over $70,000

Tax Rates 2005-06

Taxable income	Tax on this income
$0 – $6,000	Nil
$6,001 – $21,600	15c for each $1 over $6,000
$21,601 – $63,000	$2,340 plus 30c for each $1 over $21,600
$63,001 – $95,000	$14,760 plus 42c for each $1 over $63,000
Over $95,000	$28,200 plus 47c for each $1 over $95,000

The above rates do not include the Medicare levy of 1.5% (read What is the Medicare levy? for more information).

Tax offsets reduce the tax payable. Tax offsets based on taxable income levels apply to:

• individuals on low incomes below $27,475
• individuals who receive certain Australian government allowances and payments (read Beneficiary tax offset for more information)
• senior Australians (read What is the senior Australians tax offset?)

Other tax offsets apply to people with dependants, those living in remote areas and those who receive particular types of income or incur particular expenses (read About tax offsets for more information).

For more information about Sole Trader Income Tax please see the Tax Pack information at the ATO website.

Sole Traders
Partnerships
Companies