As a sole trader you do not lodge a separate business tax return. Your business profit or loss goes on your own individual return through the business and professional items schedule, and is taxed with your other income at personal rates.
This guide covers the 2025-26 return being lodged now and changes that apply to 2026-27: the schedule items, deductions, PAYG instalments, GST, the small business income tax offset and the new 4-year amendment period. Figures were checked against the ATO business schedule instructions and other ATO pages.
It is for tradies, freelancers, rideshare drivers and other sole traders who want to get their return right. If your profit is growing, our sole trader to company guide and family trust guide explain the alternatives.
Key takeaways
- Business income and expenses go on the business and professional items schedule (item P8).
- Self-lodgers must lodge the 2025-26 return by 31 October 2026.
- The small business income tax offset is 16%, capped at $1,000, for turnover under $5 million.
- PAYG instalments start automatically at $4,000 instalment income and $1,000 tax payable.
- From 2024-25 sole traders have 4 years to amend an assessment.
- Car claims are 88c/km for 2025-26 and 91c/km for 2026-27, up to 5,000 km.
Sole trader tax return at a glance
| Item | 2025-26 | 2026-27 |
|---|---|---|
| Where business income goes | BPI schedule, item P8 | BPI schedule, item P8 |
| Small business income tax offset | 16%, max $1,000 | 16%, max $1,000 |
| Cents per km rate (max 5,000 km) | 88c | 91c |
| Work from home fixed rate | 70c per hour | 70c per hour |
| Instant asset write-off | Assets under $20,000 | Under $20,000, permanent from 1 July 2026 |
| GST registration threshold | $75,000 GST turnover | $75,000 GST turnover |
| Amendment period (sole traders) | 4 years | 4 years |
Source: ATO BPI schedule 2026, ATO small business income tax offset, ATO car expenses, ATO home-based business, ATO instant asset write-off, ATO amendment time limits, checked 9 October 2026.
What goes on the business schedule?
When you personalise your return in myTax or through your agent, choosing business or sole trader income adds the business and professional items (BPI) schedule. The main items in the 2026 instructions are:
| Item | What it covers |
|---|---|
| P1 | Personal services income |
| P2 to P6 | Business information, such as your ABN and main business activity |
| P8 | Business income and expenses, and the net profit or loss |
| P9 | Business loss activity details |
| P10 | Small business entity simplified depreciation |
| P13 and P14 | Trade debtors and trade creditors |
| P15 and P16 | Total salary and wage expenses; payments to associated persons |
| P17 to P20 | Depreciating assets |
| P21 | Trading stock election |
Our tax return checklist lists the documents to gather before you start.
What income do you need to declare?
Declare all business income: card and bank receipts, cash jobs, platform income such as rideshare or delivery, and assessable government payments. If you are registered for GST, report income excluding GST. The figures should line up with your BAS, as the ATO matches them. Our activity statement guide covers BAS.
What deductions can sole traders claim?
Expenses are deductible to the extent they are incurred in earning business income. Common ones:
- Car: cents per km at 88c for 2025-26 (91c for 2026-27), up to 5,000 business km, or the logbook method.
- Working from home: the ATO allows a fixed rate per hour (70c in its 2026 example) covering energy, internet, phone and stationery, which then cannot be claimed separately. Occupancy costs like rent or interest need a genuine place of business, and that can affect CGT on your home.
- Equipment: small businesses with turnover under $10 million can write off assets costing under $20,000 each, and the ATO says this is permanent from 1 July 2026.
- Super: the ATO says sole traders don’t pay super guarantee for themselves, but most can claim personal contributions.
- Other: insurance, software, accounting fees, tools, advertising and the business share of phone costs if you use the actual cost method.
For a longer list see our sole trader deductions guide.
How do GST and PAYG instalments fit in?
You must register for GST once GST turnover reaches $75,000 (ATO). Our GST registration service can do this for you, and the ATO’s GST pages explain the rules.
PAYG instalments are prepayments of income tax. The ATO enters you automatically when your latest return shows instalment income of $4,000 or more, tax payable of $1,000 or more and notional tax of $500 or more. You can also join voluntarily. Instalments paid are credited when your return is assessed; see the ATO’s PAYG instalments pages.
What if the business made a loss?
Under the non-commercial loss rules, you can only offset a business loss against other income if your income for these purposes is under $250,000 and you pass one of four tests. Otherwise the loss is deferred and used against future business profit. Record the details at item P9.
Worked example: a designer with $95,000 turnover in 2025-26
Alex, a freelance designer registered for GST, earns $95,000 (excluding GST). Deductions: software $1,200; working from home 1,600 hours x 70c = $1,120; insurance $750; car 4,000 km x 88c = $3,520; other costs $1,500.
Total deductions: $1,200 + $1,120 + $750 + $3,520 + $1,500 = $8,090. Net business income: $95,000 – $8,090 = $86,910.
Income tax: $4,288 + 30% x ($86,910 – $45,000) = $4,288 + $12,573 = $16,861.
Small business income tax offset: 16% x $16,861 = $2,697.76, capped at $1,000. Tax after offset: $15,861. Medicare levy at 2% = $1,738.20. Total: $17,599.20.
Note that Alex does not claim phone and internet separately, because the fixed rate already covers them. Rates are from the ATO tax rates page.
How long do you keep records and fix mistakes?
Keep records generally for 5 years from when you lodge, as set out on the ATO records page. That includes invoices, receipts, bank statements, your car logbook or km records and a record of hours worked from home.
The ATO says that for the 2024-25 income year and later, sole traders have 4 years to amend an assessment. For 2023-24 and earlier, the period is generally 2 years. Our tax due dates guide lists lodgment deadlines.
Rule of thumb: Run every business dollar through one business account and reconcile it to your BAS before you lodge. If the return and the BAS do not match, fix it before the ATO asks.
Common sole trader tax return mistakes
- Leaving out cash or platform income: the ATO data-matches banks and platforms.
- Double-claiming home costs: the fixed rate already covers phone, internet and energy.
- Including GST in income: if registered, report figures excluding GST.
- Claiming a loss against salary without checking the tests: it may have to be deferred.
- Using old rates: 85c or 78c per km and 67c per hour are out of date.
FAQ about sole trader tax returns
Do I need to lodge a return if my business made a loss?
Yes. You still lodge your individual return with the business schedule. Whether you can use the loss against salary or other income this year depends on the non-commercial loss rules: your income for those rules must be under $250,000 and you must pass one of four tests. If not, the loss is generally deferred to a later year rather than lost.
When is my 2025-26 sole trader return due?
If you lodge yourself, the 2025-26 return is due by 31 October 2026. If you use a registered tax agent, your due date depends on your situation and when you engage them. The ATO says that if you are using an agent for the first time, or changing agents, you should contact them before 31 October to be part of their lodgment program. Late lodgment can attract a failure to lodge penalty.
How long do I have to fix a mistake on my return?
For the 2024-25 income year and later, the ATO says sole traders have 4 years to amend an assessment. For 2023-24 and earlier years, the period for sole traders is generally 2 years. If you find an error, such as missed income or a deduction you were not entitled to, lodge an amendment as soon as you can rather than leaving it for the next return.
Do sole traders get the small business income tax offset?
Yes, if your business has aggregated turnover under $5 million and makes a profit. The offset is 16% of the tax on your net small business income, capped at $1,000 a year. You do not apply separately: the ATO works it out from your return and shows it on your notice of assessment. A business loss counts as zero.
Can I claim my own super contributions?
Sole traders do not pay super guarantee for themselves, but most can make personal contributions and claim a tax deduction until age 75. You must give your fund a notice of intent and receive its acknowledgment before you are entitled to the deduction. Claiming it means that contribution is not eligible for the government co-contribution, and contribution caps still apply.
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This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO business schedule instructions, small business offset, non-commercial loss, instant asset write-off, home-based business, PAYG instalment, GST and amendment pages on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
