How Much Tax Should I Put Aside for My ABN?

When you earn income under an ABN, nobody withholds tax for you. Every dollar you invoice or receive lands in your bank account untouched. That feels good now, but it’s exactly why many ABN holders get caught out at tax time.

Putting money aside as you go is the simplest way to avoid a shock bill later.

Why ABN Holders Need to Set Tax Aside

With a normal job, your employer withholds tax automatically. With an ABN, that responsibility sits entirely with you.

Your tax isn’t worked out until you lodge your tax return, when your ABN profit is combined with any other income you earned during the year. If nothing has been set aside, the bill can feel sudden — even though it was always coming.

A Practical Rule of Thumb

There’s no single “legal” percentage that applies to everyone, but these ranges work well for most ABN holders:

• 25–30% if you also have a regular job

• 15–20% if ABN income is your main income

• Lower if you have strong, consistent deductions

• Higher if you don’t keep receipts or track expenses

These percentages aren’t tax law — they’re practical buffers to keep you out of trouble.

Why Deductions Change the Number

You only pay tax on profit, not income.

Profit is your ABN income minus your tax-deductible expenses. If you claim deductions properly, your taxable profit drops and so does your tax bill. If you miss deductions, your profit looks bigger than it should and the tax hurts more.

That’s why record-keeping matters just as much as setting money aside.

When the ATO May Ask for Tax During the Year

As your income grows, the ATO may place you into the PAYG instalment system. This spreads your tax payments across the year instead of leaving everything to year-end.

For most new ABN holders, this doesn’t happen straight away — but it’s something to be aware of as your business grows.

Next Steps for ABN Holders

Setting aside tax regularly removes stress and gives you control over your cash flow. The goal isn’t guessing — it’s understanding your real position based on income and deductions.

If you want to calculate what you actually owe and avoid over- or under-saving, you can run everything through GoTax here:
https://www.gotax.com.au/small-business-tax-return