As a sole trader your tax return covers both your personal income and your business activity in one lodgement — which means most of the budget changes for individuals affect you, and several of the business measures do too. Here is a complete picture of what's relevant.

Your personal tax bill is going down

The same personal income tax cuts that apply to employees apply to you. From 1 July 2026, the rate on income between $18,201 and $45,000 drops from 16% to 15%, with a further cut to 14% from 1 July 2027. The new Working Australians Tax Offset of up to $250 from 2027–28 applies to you as well — you are a working Australian.

For sole traders whose taxable income sits between $45,000 and $135,000, the combined effect of the Government's staged tax cuts over the past two budgets is meaningful. If you haven't reviewed your PAYG instalment rate recently, it may be worth adjusting it to reflect the lower rates coming into effect.

The $1,000 instant deduction is specifically for work-related employee expenses — it does not replace the business expense deductions you already claim through your tax return. As a sole trader, you continue to claim business expenses in the normal way, with receipts and records. The instant deduction is not relevant to your business schedule.

If you also have employment income on top of your sole trader income, the instant deduction may apply to the employment component.

The $20,000 instant asset write-off is now permanent

This one is significant. The $20,000 instant asset write-off for small businesses has been made permanent from 1 July 2026 — no more annual uncertainty about whether it will be extended. If you buy an eligible business asset costing less than $20,000, you can deduct the full cost immediately rather than depreciating it over time.

This applies to sole traders with business turnover under $10 million — which covers the vast majority of sole trading operations. Tools, equipment, technology, vehicles (subject to the business use percentage), and other eligible assets all qualify. The asset must be ready for use by 30 June in the relevant income year.

Key date: Permanent from 1 July 2026.

The reintroduction of loss carry-back allows eligible companies to offset losses against tax paid in the prior two years and receive a refund. This does not apply to sole traders directly — as a sole trader, your business losses flow through to your individual return and are subject to the non-commercial loss rules.

If your sole trader business is generating consistent losses and you're considering incorporating, this is worth factoring into the conversation.

Capital gains and your business assets

If you sell a business asset — equipment, a vehicle, goodwill, or the business itself — the CGT changes from 1 July 2027 are relevant to you.

The 50% CGT discount for assets held more than 12 months will be replaced by cost-base indexation and a minimum 30% tax on real capital gains. For sole traders, the small business CGT concessions (15-year exemption, retirement exemption, active asset reduction, and rollover) remain available and can significantly reduce or eliminate CGT on the sale of a business or its assets — but the interaction with the new minimum tax rules will need careful consideration.

If you are planning to sell your business or retire in the next few years, the timing of any disposal relative to 1 July 2027 is worth discussing with us.

Key date: 1 July 2027.

Negative gearing and investment property

If you own investment property alongside your sole trading business, the negative gearing changes apply to you in the same way they apply to individual investors. Properties held before Budget night are protected. New purchases of established residential properties after 12 May 2026 will no longer allow losses to be offset against your other income from 1 July 2027.

GIC and SIC interest — no longer deductible

From 1 July 2025, General Interest Charge and Shortfall Interest Charge on ATO debts are no longer deductible. For sole traders who carry ATO payment arrangements — which is more common in this group than most — this is a real cost increase. If you have an outstanding ATO debt, factor the after-tax cost of the interest into your planning.

Payday super is coming — and it affects you if you have employees

If you employ staff, payday super takes effect from 1 July 2026. Super guarantee must be paid on each payday rather than quarterly. If your payroll system isn't already set up for this, now is the time to get it sorted. We can help you review your payroll arrangements before the deadline.