How much should a freelancer set aside for tax in Australia?

When you are on a salary, tax is invisible. It comes out before the money ever hits your account, so “what is safe to spend” is just whatever landed. Freelancing quietly removes that safety net. The full invoice hits your account, it feels like yours, and then months later a tax bill arrives for a slice of money you have already spent. The fix is boring and it works: set aside your tax the moment you get paid, before the money starts to feel spendable.

This is general information to help you build a habit, not tax or financial advice. Your real rate depends on your income, structure and deductions. For your situation, check the ATO or talk to a registered tax agent.

Start with a set-aside percentage, not a guess

The trap is treating each invoice as fully yours and hoping there is enough left at tax time. There rarely is. Instead, decide on a fixed percentage of every payment that is “not yours”, and move it aside the day it arrives.

In Australia, income tax is progressive, so there is no single correct number. Many sole traders use a rough set-aside in the range of 25% to 35% of income as a starting point (these are illustrative figures, not a recommendation for you). If you earn more, your marginal rate is higher and the percentage should climb. The exact figure matters less at first than the habit of removing it immediately, so it never enters your spending money.

A simple way to sanity-check your number: look at what you actually paid in tax last year as a share of what you earned, and use that as your starting percentage this year. Then adjust as your income changes.

Do not forget GST and super

Two things catch new freelancers out:

• GST. Once your turnover is over the registration threshold, you generally have to register for GST, charge it, and pass it on. GST you collect is never your money, so treat it as a separate set-aside from income tax, not part of it. Check the current threshold and rules with the ATO.
• Super. As a sole trader nobody pays super for you. If you want the retirement contributions an employee gets automatically, that is another slice to set aside deliberately.

The theme is the same across all three: the money that is not really yours should leave your spending pile the instant it arrives.

Build a buffer for the quiet months

Irregular income is not just a tax problem, it is a rhythm problem. A big month can hide a lean one that is about to follow. Alongside your tax set-aside, aim to hold a cash buffer you can measure in months of runway: if your essential monthly costs are, say, $3,000 (an example), then $9,000 set aside is roughly three months of breathing room. A buffer is what turns a quiet month from a crisis into a shrug.

Know your “safe to spend” number

Put it together and the number that actually matters is not what is in your account. It is what is left after tax set-aside, GST, and your committed bills. That remainder is your real safe-to-spend figure, and it is usually smaller and calmer than the raw balance staring back at you.

This is the number CASHO is built to surface for the “just me” household. You add your income and costs yourself, and CASHO shows a tax set-aside figure, a cash buffer with months of runway, and a safe-to-spend number once tax and bills are accounted for. There is no bank connection, so nothing links to your accounts; you add what matters, which keeps your finances private and the picture honest. It will not file your return or move any money, and it is general information, not advice, but it turns “is this invoice safe to spend?” into a number you can actually see.

The short version

• Decide a set-aside percentage and move it aside the day each invoice is paid.
• Keep GST and super as separate set-asides, not part of your income tax.
• Hold a buffer you can count in months of runway for the quiet stretches.
• Spend from your safe-to-spend number, not your account balance.
• For your actual rates and obligations, check the ATO or a registered tax agent.

The goal is not to become an accountant. It is to make the tax bill a non-event, because you set the money aside back when it arrived.

Written for your household type? See CASHO for freelancers →

CASHO is a budgeting and tracking tool, general information only, not financial or tax advice. It has no bank connection and never moves money. Example figures are illustrative, not guaranteed outcomes.