How to lodge your small business tax return in Australia

Published Saturday 26 September 2026

Table of contents

• Do you need to lodge a small business tax return?
• How your business structure changes what you lodge
• When is your small business tax return due?
• How to lodge your small business tax return
• What can you claim? Common small business tax deductions
• What records do you need to keep?
• Common mistakes to avoid
• Simplify your small business tax return with Xero
• FAQs on small business tax returns

Key takeaways

• If you carried on a business during the year, you need to lodge a tax return, even if you made no income, because there's no separate income threshold for business income.
• As a sole trader, you report your business income in your individual tax return using the business and professional items schedule in myTax through myGov.
• Self-lodgers need to lodge by 31 October; a registered tax agent can arrange a later date if you're on their books before that deadline.
• Claiming your deductions and the small business income tax offset can lower your bill, so good records make the whole process easier.

Do you need to lodge a small business tax return?

If you carried on a business during the financial year, you need to lodge a tax return, even if the business made no income. There's no separate income threshold for business income, so running a business is the trigger, not how much you earned.

As a sole trader, you don't lodge a separate return for the business. You report your business income in your individual tax return, alongside any other income you earned. The Australian Taxation Office (ATO) sets out who needs to lodge in its income tax return guidance for business.

What counts as running a business

Running a business is more than a one-off sale or a hobby. It usually means you're operating in a regular, organised way with the intention of making a profit.

Common examples include freelancers, consultants, tradespeople, and landlords who manage property as a business. If you invoice clients, take on jobs, or offer services for payment on a repeat basis, you're generally carrying on a business and need to report that income.

How your business structure changes what you lodge

Your business structure decides which return you lodge and how. Most self-employed people start as sole traders, which is the simplest structure to report.

As a sole trader, you report your business income and expenses in your individual tax return, so there's one return to lodge. Other structures work differently, and it helps to know where you fit:

• Partnership: The partnership lodges its own return, then each partner reports their share of the income in their individual return.
• Company: A company lodges a separate company tax return and pays the company tax rate of 30% (or 25% for a base rate entity).
• Trust: A trust lodges its own return, and beneficiaries report the income they receive.

If you're a sole trader, the rest of this guide focuses on your situation: one return, lodged through myGov.

When is your small business tax return due?

If you lodge your own return, the due date is 31 October, as set out in the government guidance on lodging and paying tax. This falls after the Australian financial year, which runs from 1 July to 30 June, so the 2025 – 26 return covers income earned between 1 July 2025 and 30 June 2026.

A registered tax agent can arrange a later lodgment date for you, but you generally need to be on their books before the 31 October deadline to qualify. Lodging on time helps you avoid penalties and makes it easier to plan for what you'll owe as a sole trader.

How to lodge your small business tax return

As a sole trader, you can lodge online yourself using myTax, the ATO's free lodgment tool inside myGov. You can also lodge through a registered tax agent or use Standard Business Reporting (SBR) enabled software if you prefer. Here are the steps to lodge yourself:

1. Get your records together

Gather everything you'll need before you start so you're not hunting for figures midway through. Pull together your income records, invoices, receipts for expenses, bank statements, and any records for assets you bought during the year.Having these ready makes it faster to complete the business and professional items schedule and reduces the chance of errors.

2. Link myGov to the ATO

Sign in to your myGov account, then link it to the ATO if you haven't already. Linking gives you access to myTax and lets the ATO pre-fill some of your details.If you don't have a myGov account yet, you can create one for free and follow the prompts to connect the ATO as a linked service.

3. Complete the business and professional items schedule in myTax

Once you're in myTax, work through your individual return and select the business and professional items schedule. This is where you report your business income and expenses as a sole trader.

Enter your total business income, then record your allowable expenses in the relevant categories. Take your time here, since these figures determine your net business income.

4. Add deductions and check pre-filled data

Add the deductions you're entitled to claim, such as running costs, tools, and vehicle expenses. Then review the information myTax has pre-filled from banks, government agencies, and other sources.Check the pre-filled figures against your own records and correct anything that looks off before you move on.

5. Review and submit

Read through your whole return before you lodge to make sure the numbers add up and nothing's missing. myTax will show you an estimate of your refund or amount owing.

When you're happy it's accurate, submit the return. You'll get a receipt confirming it's lodged, and you can track its progress in myGov.

What can you claim? Common small business tax deductions

You can claim expenses that directly relate to earning your business income, which lowers the amount of tax you pay. As a sole trader, common deductions include:

• running costs: everyday expenses such as stationery, bank fees, and subscriptions
• home office costs: a portion of electricity, internet, and workspace expenses if you work from home
• motor vehicle expenses: running costs for a vehicle used for work, based on your business use
• tools and equipment: items you buy to do your work
• phone and internet: the work-related share of your bills
• software subscriptions: tools you pay for to run your business

Two concessions can make a real difference to sole traders. The instant asset write-off lets you claim an immediate deduction on eligible assets costing less than $20,000 each for the 2026 – 27 income year, provided the asset is first used or installed ready for use between 1 July 2026 and 30 June 2027 and your turnover is under $10 million.

The small business income tax offset can reduce the tax on your business income by up to $1,000 a year. It's worked out as 16% of the tax payable on your net small business income, and sole traders are eligible. The ATO sets out the details of the small business income tax offset. Keeping your business finances organised helps you claim everything you're owed, so check out this guide on small business accounting for help.

What records do you need to keep?

You need to keep records that explain your business income and expenses, and hold onto them for five years from the date you lodge. Good records make lodging faster and back up every deduction you claim if the ATO asks.

The records worth keeping include:

• income records: invoices, receipts, and records of sales
• expense records: receipts and invoices for anything you claim
• bank statements: business account statements that match your income and expenses
• asset records: purchase details for equipment and tools you claim

Digital record-keeping makes this far easier than a shoebox of paper. Storing receipts and statements electronically means they're searchable, backed up, and ready when you lodge.

Common mistakes to avoid

A few simple slip-ups can cost sole traders time, money, or a penalty at tax time. Watch out for these common mistakes:

• Missing the deadline: Lodging after 31 October when you're self-lodging can lead to penalties.
• Mixing personal and business money: A separate business bank account keeps your income and expenses clean and easy to report.
• Guessing your deductions: Claim only what you can back up with a record, and check the rules before you claim.
• Not keeping receipts: Without evidence, you can't support a deduction if you're asked to.
• Forgetting to set money aside for tax: Putting a portion of your income away as you go means you're ready when the bill arrives.

Simplify your small business tax return with Xero

Getting your tax return sorted comes down to good records and knowing what to claim, and that's far easier when your numbers live in one place. Xero brings your income, expenses, and receipts together, so figures are ready when you sit down to lodge as a sole trader.

With bank transactions reconciled and receipts captured through the year, you spend less time chasing paperwork and more time running your business.

Ready to see how organised record-keeping makes tax time simpler? Get one month free.

FAQs on small business tax returns

Here are quick answers to the questions sole traders ask most often about lodging a small business tax return.

How do you lodge a tax return for a small business?

As a sole trader, you lodge online through myTax in myGov, reporting your business income in the business and professional items schedule of your individual return. You can also use a registered tax agent or SBR-enabled software.

How much can a small business earn before paying tax?

For sole traders, the individual tax-free threshold is $18,200, so you start paying tax on income above that. You still need to lodge a return if you carried on a business, even below the threshold.

Can you do your own small business tax return?

Yes. Sole traders can lodge their own return for free through myTax in myGov, without needing an accountant.

What is the $1,000 small business tax offset?

The small business income tax offset reduces the tax on your net small business income by up to $1,000 a year. It's calculated as 16% of the tax payable on that income.