For sole traders, there’s plenty of pressure when it comes to taxes. Collating income sources, managing deductions correctly, and filing a tax return can be challenging and stressful without the necessary skills and time. We look at sole trader tax trends.

The rise of advanced technology, AI-powered tax tools, and increased scrutiny from the government are heavily impacting how sole traders manage their obligations and complete their tax returns as we move into 2025. 

Here are some sole trader tax trends we’re likely to see in the coming year and beyond.  

1.Increased ATO scrutiny 

In 2025, small businesses and sole traders will likely find themselves under increasing scrutiny. Data has shown that unpaid tax debt for small businesses grew to $35.6 billion in 2024. It’s also been revealed that the tax gap for small businesses is 12.6%, a contrast to the 4.2% gap for larger organisations. 

Deputy Commissioner, Will Day, stated that the gap exists due to mistakes, deliberate tax evasion, and some small businesses behaving opportunistically. 

In light of the deficit, the ATO has vowed to put pressure on small businesses to meet their tax obligations and file their returns correctly. That means sole traders and small businesses are under pressure to get it right at tax time. 

2. AI-powered accounting 

The rise of AI is impacting almost every industry on the planet. When it comes to taxes, AI tools are already beginning to streamline the tax process, helping sole traders to more efficiently manage their tax affairs, and this is likely to increase further in 2025 as the technology becomes more sophisticated.  

TaxLeopard, for example, partnered with leading Generative AI incubator, InnovateGPT, to build a Smart Tax Assistant for sole traders. The AI-powered tech will offer on-demand, tailored, real-time accounting and tax assistance to sole traders ensuring they receive expert advice when they need it. 

3. Digitisation of tax management  

Traditionally, sole traders managed their tax affairs on paper, including manually updating and tracking physical logbooks, balance sheets, receipts and more – which was time-consuming and left plenty of room for inaccuracies and sometimes important paperwork was lost. 

While a shift to a completely digitised ecosystem won’t happen next year, we’ll move one step closer to it. Innovation in digitised tools that enable sole traders to do everything from log expenses and digital receipts to automatically track payments, income and tax deductions, is booming in Australia.

2025 will be the year digitisation of finances and accounting truly makes its mark, with a much wider cohort of sole traders adopting all-in-one tax platforms that look after it for them, often for a lesser fee than hiring an accountant. 

4. Gig economy workers become tax savvy

2024 was a significant year of change for the gig economy in Australia, effectively making gig workers’ role as sole traders for tax purposes more pronounced. 

From July, The Sharing Economy Reporting Regime (SERR) came into effect for transactions made through electronic distribution platforms (EDPs) for the supply of services such as asset hire, performing tasks, and food delivery – extending from taxi travel, ride-sourcing and short-term accommodation already listed. 

This increased the types of gig economy workers that need to log their transactions accurately, including tracking invoices, payments, and expenses, and submitting BAS and annual statements in a timely and accurate manner.

As we move into 2025, gig economy workers will become more tax savvy, and the companies who hire them are already partnering with digital tax platforms to help their gig staff automatically and simply manage their accounts. 

2025 is going to be the year that sole traders truly come into their own with managing their finances. Whether it’s traditional businesses, or new-age entities like gig economy workers – the adoption and innovation of tools that simplify the management and logging of their taxes will continue to grow. This is particularly true as the ATO clamps down on small businesses and sole traders to get their taxes right. 

Sole trader tax trends By Selda Kaplan, CEO and Co-Founder at TaxLeopard