How much tax will I have to pay for a side business?

I am a full time employee and want to start a small business on the side.  If I go ahead and register a small business as a Sole trader with an ABN, I understand that I need to update my details and link my tax file number annual wages etc. when registering the business.
For example, if I am to earn $12,000.00 net profit per annum after all my expenses, how much (%) tax will I have to pay?


1 Answer

Lee Duffield

Lee Duffield Manager at CMS Private Advisory

The amount of tax you will pay on the income from your sole trader business will depend on how much you earn from your annual wages.

For a sole trader, your business income will add to your wages income and you will pay tax at your marginal tax rate.

For 2017-2018 theindividual marginal tax rates are:
$0-18,200 Nil Tax
$18,201 - $37,000 Tax - 19c for every dollar over $18,200
$37,001 - $87,000 Tax - $3,572 plus 32.5c for every dollar over $37,000
$87,001 - $180,000 Tax - $19,822 plus 37c for every dollar over $87,000
$180,001 and over Tax - $54,232 plus 45c for every dollar over $180,000

These do not include the 2% medicare levy. You will need to pay an additional 2% on your total taxable income for the medicare levy.

An example would be if you earn $50,000 from wages and $12,000 from your business, the additional tax on your business income would be $3,900 plus $240 medicare levy. This is because you fall in the 32.5c marginal tax bracket.  

As a salary and wage earner, your employer should be withholding the appropriate amount of tax and medicare levy from your wage to cover the tax on the $50,000.

Mary Grace Macatangay

Mary Grace Macatangay , Influencer Relationship Manager at SavvySME

thanks for the detailed response Lee! :)