Don't Guess Your ABN Tax; Here's How It's Actually Calculated

If you’ve ever wondered what percentage of tax you pay on an ABN, you’re not alone. One of the biggest misconceptions among Australian solo traders is that having an ABN entitles them to a fixed tax rate. The truth is, there isn’t a single ABN tax percentage. Your tax depends on how much taxable income you earn after claiming eligible business deductions.

There is No Fixed ABN Tax Rate

An Australian Business Number (ABN) is simply an identifier for your business. It doesn’t determine how much tax you pay. Instead, your income is taxed according to Australia’s individual income tax rates if you’re operating as a sole trader.​

This means the answer to what percentage of tax do I pay on an ABN depends entirely on your annual taxable income.

How Your ABN Tax Is Calculated

For sole traders, ABN income is added to other personal income and taxed at standard individual tax rates.

Those rates apply progressively. Not all income is taxed at a single rate. Each portion is taxed at the rate that applies to that bracket.

For the 2026-27 financial year, Australian resident individual tax rates are broadly:

• $0 - $18,200: tax-free

• $18,201 - $45,000: 15%

• $45,001 - $135,000: 30%

• $135,001 - $190,000: 37%

• Over $190,000: 45%

On top of this sits the Medicare levy, generally 2%. Medicare levy

ABN income may feel like “business money”, but it is still personal income for tax purposes unless operating through a company or trust.

Why Business Expenses Matter

Many new business owners overestimate the tax they'll pay because they forget about deductions. Claiming legitimate business expenses reduces your taxable income, which can lower your overall tax bill.

Keeping accurate records throughout the financial year also makes tax time much easier and helps ensure you don't miss valuable deductions.

Don't Forget Other Tax Obligations

Depending on your business, you may also need to consider:

• GST registration if your annual turnover reaches the required threshold.

• PAYG instalments if required by the Australian Taxation Office.

• Superannuation contributions if you employ staff.

These obligations are separate from your income tax but are important parts of managing an ABN.

Want a deeper understanding?

Read our blog posts for a deeper dive.

• How Much Tax Do ABN Holders Actually Pay?

How much ABN holders pay? Explained with  practical example.

• Is ABN Income Taxed Differently From Salary?

What makes ABN income tax different from salary

• Do ABN Holders Pay Tax Under the Tax-Free Threshold?

When do ABN holders pay tax under the tax-free threshold?

Final Thoughts

So, what percentage of tax do I pay on an ABN? The simple answer is: there isn't one fixed percentage. Your tax is based on your taxable income after deductions and the Australian income tax rates that apply to your earnings.

Understanding how your ABN tax is calculated allows you to budget more accurately, avoid unexpected tax bills, and make informed financial decisions for your business.