How to Estimate Your Tax Bill as a Freelancer in Australia

When you're employed, you never have to think about your tax bill. Your employer withholds it from every paycheck, sends it to the ATO, and by the time you lodge your return, most of the work is done. You might owe a few hundred dollars or get a small refund. No surprises.

As a freelancer, nobody withholds anything. Clients pay you the full amount. The money sits in your bank account looking like it's yours. Then, months later, you lodge your tax return and discover that a significant chunk of it belongs to the ATO.

That gap between "what's in my account" and "what I owe" is where the anxiety lives. The fix is simple: learn how to estimate the number. Once you know roughly what you'll owe, you can set money aside as you earn it and tax time becomes a non-event.

The basic calculation

Your freelance tax bill is calculated on your taxable income, which is your total business income minus your allowable deductions. The formula:

Total freelance income (everything clients paid you) minus business expenses and deductions minus any voluntary super contributions equals taxable income

Your tax is then calculated on that taxable income using the marginal tax rates, plus 2% Medicare Levy on the full taxable amount.

If you also had PAYG employment during the year, that income gets added to your freelance income. All your income from all sources is combined, and tax is calculated on the total.

2025-26 tax rates

These are the individual income tax rates for Australian residents for the 2025-26 financial year:

Plus 2% Medicare Levy on your entire taxable income.

The system is progressive, meaning you don't pay 30% on all your income just because you're "in the 30% bracket." You pay 0% on the first $18,200, 16% on the next $26,800, 30% on the next $90,000, and so on. Each bracket only applies to the income within that range.

This is why your effective tax rate (total tax divided by total income) is always lower than your marginal rate (the rate on your last dollar earned).

Worked examples

Let's walk through the actual calculation at three income levels. These assume no deductions and no super contributions, so think of them as the maximum you'd owe. We'll subtract deductions afterwards.

$80,000 taxable income

Effective rate: 20.5%. On $80,000, you'd owe roughly $16,400 in total tax.

$120,000 taxable income

Effective rate: 24.3%. On $120,000, you'd owe roughly $29,200.

$150,000 taxable income

Effective rate: 26.6%. On $150,000, roughly $39,800.

How deductions reduce your bill

Every dollar of legitimate business expenses reduces your taxable income by a dollar, which reduces your tax by your marginal rate.

If your marginal rate is 30% (plus 2% Medicare), every $1,000 in deductions saves you $320 in tax.

Common deductions most freelancers can claim:

• Home office costs (67c/hour fixed rate, or actual costs)
• Software and subscriptions (Adobe, Xero, project tools)
• Phone and internet (business-use percentage)
• Professional development (courses, books, conferences)
• Insurance (professional indemnity, public liability, income protection)
• Equipment and depreciation
• Accounting fees

Our complete deductions list covers everything. Most freelancers have between $5,000 and $25,000 in deductions, depending on their expenses.

Example: You earn $120,000 and have $15,000 in deductions. Your taxable income drops to $105,000. Your tax bill goes from $29,188 down to roughly $24,388. That's $4,800 in savings from deductions alone.

This is why keeping receipts matters. Every missing receipt is a deduction you can't claim, and a deduction you can't claim is tax you're overpaying.

How super contributions reduce your bill

Voluntary super contributions are one of the biggest tax levers available to freelancers. When you contribute to super and claim it as a deduction, your taxable income drops by the full contribution amount.

The money is taxed at 15% inside super instead of your marginal rate outside. The difference is your tax saving.

Example: You earn $120,000, have $15,000 in deductions, and make a $20,000 super contribution.

• Taxable income: $120,000 - $15,000 - $20,000 = $85,000
• Tax on $85,000: $14,788 + ($5,000 × 30%) = $16,288
• Medicare: $85,000 × 2% = $1,700
• Total tax bill: $17,988

Compare that to the $29,188 you'd owe on $120,000 with no deductions and no super. That's $11,200 less tax. Your super contribution cost you $3,000 in contributions tax (15% of $20,000) inside the fund, so the net benefit is $8,200.

The trade-off is real: money in super is locked until preservation age (currently 60). You can't access it if things get tight. Only contribute what you can afford to set aside long-term. Our super calculator shows the exact saving at your income level.

What about PAYG instalments?

If you've already lodged a tax return showing business income, the ATO may have put you on PAYG instalments. These are quarterly pre-payments toward your annual tax bill, reported on your BAS.

If you're paying PAYG instalments, you've already been chipping away at this year's tax throughout the year. When you lodge your annual return, the instalments you've already paid get credited against your total tax bill. You only owe the difference.

Example: Your total tax liability for the year is $25,000. You've paid $18,000 in PAYG instalments across four quarters. Your remaining bill at tax time is $7,000.

If the ATO's instalment amount doesn't match your actual income (because your income went up or down significantly), you can vary the instalment on your BAS. This avoids overpaying or underpaying throughout the year. See our PAYG instalments guide for how to adjust it.

If you also have PAYG employment

Many freelancers do some contract or part-time work alongside freelancing. If your employer is withholding tax from that income, the calculation changes.

Your tax is calculated on your combined total income from all sources. The PAYG tax your employer has already withheld gets credited against the total, just like PAYG instalments. You only owe the gap.

The catch: your freelance income sits on top of your employment income. If your PAYG job pays $60,000, your freelance income starts in whatever tax bracket $60,000 ends in. For someone earning $60,000 in employment, every dollar of freelance income is taxed at 30% (plus Medicare) from the first dollar.

This means the 30% set-aside rule might not be enough if you have substantial PAYG income pushing your freelance earnings into a higher bracket. Consider setting aside 35% of your freelance income in that situation.

Putting it all together

Here's the practical version. To estimate your tax bill:

Quick reference table

For a rough estimate, here's the total tax (income tax + Medicare Levy) at common freelance income levels, before and after typical deductions:

These are estimates. Your actual bill depends on exactly which brackets your income falls into after deductions, and whether you have any tax offsets. But for planning purposes, they'll get you within a few hundred dollars.

What if the number is bigger than you expected?

Three things to consider before panicking:

1. Check your deductions. Most freelancers underestimate what they can claim. Go through the full deductions list and make sure you're not missing anything. Home office alone can be worth $2,000-$4,000 per year.

2. Consider a super contribution. If you have cash available, a voluntary super contribution before June 30 directly reduces your taxable income. A $10,000 contribution at a 32% marginal rate saves you $1,700 in tax this year. Our super calculator shows the exact number for your situation.

3. Talk to the ATO early. If you can't pay the full amount, call them before the due date. They offer payment plans and are far more accommodating when you reach out proactively. The General Interest Charge (about 11%) is much cheaper than ignoring the problem.

For a complete EOFY checklist covering everything you need to sort before June 30, including super deadlines, deduction strategies, and income timing.

Frequently asked questions

How much tax do freelancers pay in Australia?

It depends entirely on your taxable income. At $80,000, your total tax (including Medicare) is roughly $16,400 before deductions (effective rate of 20.5%). At $120,000, it's roughly $29,200 (24.3%). Deductions and super contributions can reduce these amounts significantly.

Do freelancers pay more tax than employees?

No. The tax rates are identical. The difference is that employees have tax withheld from each pay, so the bill is spread across the year. Freelancers pay it in a lump sum (or through quarterly PAYG instalments). The total amount is the same for the same income.

When do freelancers pay tax?

If you're on PAYG instalments, you pay quarterly (October, February, April, July). Any remaining balance is due when you lodge your annual tax return (31 October if self-lodging, or later if using a tax agent). If you're not on instalments, the full amount is due when you lodge.

Is GST part of my tax bill?

No. GST is a separate obligation reported on your BAS, not your income tax return. GST you collect from clients isn't your income. It's the ATO's money that passes through your hands. Your income tax is calculated on your GST-exclusive revenue.

Should I use an accountant to estimate my tax?

For a rough estimate, the method in this article works fine. For your actual return, an accountant is worth considering if your income is above $100,000, you have a mix of PAYG and freelance income, or you have complex deductions. Most charge $300-$800 for a sole trader return and will often find deductions that more than cover their fee.

How do I estimate tax if my income varies month to month?

Use your year-to-date total and extrapolate. If you've earned $50,000 in the first six months and expect a similar second half, estimate based on $100,000. If your income is seasonal, use last year's total as a starting point and adjust. The 30% set-aside rule works regardless of income variability because it scales with each payment.

What's the Medicare Levy Surcharge?

The Medicare Levy (2%) applies to everyone. The Medicare Levy Surcharge (1-1.5%) is an additional charge for higher earners ($93,000+ for singles) who don't have private hospital insurance. If you earn above the threshold, getting basic hospital cover is usually cheaper than paying the surcharge. Check the ATO website for current thresholds.