Young woman smiling at her phone while sitting at a desk surrounded by artistic tools
Step One - Sole Trader Tax: The Ultimate Guide

Sole Trader Tax: Glossary and Dates

Essential information you need before you start

Key Takeaways:

  • Understand important terms we’ll use throughout this guide 

  • Learn when PAYG instalments and annual taxes are due

Whether you’re doing your taxes for the first time or simply need a refresher before you jump into this year’s tax return, this page will help you understand the fundamentals and ATO terms we’ll be using. 

Let’s dive in!

Glossary of Tax Terms

GST Percentage Icon

GST

Goods and Services Tax

GST is a 10% tax charged on goods and services sold in Australia. Freelancers earning more than $75,000 a year from their business usually have to collect this fee on their invoices.

Also, you are likely to be charged GST on some products and services you use. You can claim this back at tax time.

BAS Calculation Icon

BAS

Business Activity Statement

BAS is a form businesses must submit to the Australian Tax Office, usually on a quarterly basis. It summarises:

  • Your gross income for the quarter

  • The GST you charged clients over the quarter 

  • The GST you paid on business expenses

When you submit your BAS, you’ll also submit a payment covering your PAYG instalment (see below) and the balance of your GST. (GST you charged minus GST you paid on business expenses.)

PAYG Icon

PAYG

Pay As You Go

The ATO’s PAYG system spreads out tax payments throughout the financial year, typically quarterly. Most freelancers and sole traders are required to make PAYG instalments.

The ATO will use your annual tax return from the prior year to estimate how much you owe for Q1 of the coming financial year. They will either assign you a flat rate dollar amount (like $1,000 quarterly) or give you a percentage as an instalment rate, like 17% of what you earn.

Sole traders can adjust their instalments to more closely reflect their income each quarter and avoid over or underpaying.

Note: These types of PAYG payments are called PAYG-I, which stands for “Individuals.” PAYG-w stands for “withholding,” which is when you withhold instalments on behalf of your employees

EOFY (End of Financial Year) Icon

EOFY

End of Financial Year

June 30th is the last day of the financial year, which makes July 1st the first day of the new financial year.

When do I need to submit my income tax return?

Your tax return for the financial year that’s just ended must be filed by October 31st if you are lodging on your own, and May 15th if you are filing with a registered tax agent.

Image of a hand drawn calendar

When do I need to submit my BAS forms?

The ATO will send you an alert via the MyGov portal before you need to make payments, but it’s still a good idea to mark down these BAS due dates.

  • Quarter 1
    July - September
    October 28
  • Quarter 2
    October - December
    February 28
  • Quarter 3
    January - March
    April 28
  • Quarter 4
    April - June
    July 28
If you submit your BAS using a tax agent, you’ll have an additional 30 days after the deadline to submit your form.
Profile photo of Holly Shoebridge (Accountant) smiling
Ask the expert:

What’s the difference between quarterly tax payments and your annual tax return?

Your annual tax return is a summary of your business activity over the entire financial year that’s just ended. When you file this, you’re giving the ATO information about:

  • The income you earned over the financial year

  • The business expenses you had over the financial year

The ATO then uses this information to estimate your quarterly PAYG payments over the coming financial year.

Your fourth quarterly payment for the financial year may happen around the same time as your annual tax return, but they are not the same thing. You always need to file an annual tax return, as well as all four quarterly payments each year.

Continue to the next step:
Calculating your taxable income