Is $85,000 a Good Income for a Self-Employed Person in Australia?

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An income of $85,000 annually sounds like a comfortable figure, suggesting financial stability and a good quality of life. This amount provides a clear and predictable path for a traditional salaried employee for budgeting and planning. However, for a self-employed individual in Australia, that same number carries a different weight, complicated by the responsibilities of running a business. Navigating taxes, superannuation, business expenses, and income volatility transform the question from a simple yes or no into a more detailed financial analysis. The unique challenges entrepreneurs face mean financial discipline is paramount to making this income work.

Successfully managing an $85,000 income as your boss requires a clear understanding of your financial obligations beyond what a typical employee considers. Recent findings from the Great Southern Bank revealed that 40% of people believe getting a mortgage as a small business owner is harder, primarily due to perceived income instability. This article breaks down what an $85,000 income truly means for a self-employed Australian, exploring the take-home pay, essential financial strategies, and the lifestyle it can support.

What an $85,000 Income Looks Like After Tax

Before determining if $85,000 is a good income, you must first understand how much of it you actually get to keep. Unlike a salaried employee whose employer withholds tax, a self-employed person is responsible for calculating and paying their income tax and Medicare levy. This process requires careful planning throughout the year to avoid a large, unexpected bill at tax time.

The Australian Taxation Office (ATO) regularly updates its guidelines, and staying informed is a key part of managing your finances effectively as a business owner. According to recent ATO guidelines for 2025 tax returns, meticulous record-keeping for all income and deductions is essential for lodging an accurate return.

Calculating Your Take-Home Pay

To illustrate the financial breakdown, assume that the $85,000 figure represents your taxable income after deducting all allowable business expenses. Using the 2024–2025 tax rates, the calculation shows a significant portion is allocated to taxes. For the financial year, income between $45,001 and $135,000 is taxed at 30%, directly affecting anyone in this bracket. In addition to income tax, the Medicare levy of 2% is applied to your taxable income, contributing to the funding of Australia’s public healthcare system. This structured approach to taxation means that higher earners contribute a bit more on a proportional basis.

Income Bracket	Calculation	Tax Payable
$0 – $18,200	0%	$0
$18,201 – $45,000	16% of income over $18,200	$4,288
$45,001 – $85,000	30% of income over $45,000	$12,000
Total Income Tax		$16,288
Medicare Levy	2% of $85,000	$1,700
Total Tax Payable		$17,988
Annual Take-Home Pay	$85,000 – $17,988	$67,012

This leaves an annual take-home pay of $67,012, translating to approximately $5,584 per month before considering any voluntary superannuation contributions.

The Role of Superannuation

One of the most significant differences between being employed and self-employed is the responsibility for retirement savings. Salaried employees receive mandatory superannuation guarantee (SG) contributions from their employers, a figure set to rise from 11.5% to 12% on July 1, 2025. For a salaried individual, $85,000 amounts to an additional $10,200 annually, which their company pays into their retirement fund. As a self-employed person, you must generate these contributions from your post-tax income or make voluntary concessional contributions to reduce your taxable income.

For the self-employed, disciplined contributions to a super fund are not just a recommendation but a fundamental pillar of long-term financial security. Failing to plan for superannuation can leave a substantial gap in retirement savings, making it a critical component of financial planning. The government continues to adjust superannuation rules, and recent discussions around a new tax that could affect half a million Australians with high super balances underscore the need for all earners to stay informed about their retirement obligations and opportunities.

The Financial Realities of Being Your Own Boss

The autonomy of self-employment comes with financial challenges that extend beyond tax and superannuation. The gross income figure of $85,000 often masks the business’s underlying costs and the pressure of maintaining a steady cash flow. Unlike salaried workers who receive a predictable paycheque, freelancers and sole traders must contend with fluctuating revenue streams and cover operating costs. This reality requires a more proactive and strategic approach to financial management than a traditional employee.

Accounting for Business Expenses

A common mistake is to view the $85,000 gross revenue as personal income. In reality, this amount must first cover all business-related expenses before you can determine your profit. These deductions include software subscriptions, professional insurance, marketing costs, accounting services, and office supplies.

The ATO allows you to claim deductions for expenses directly related to earning your income, but you must keep diligent records to substantiate your claims. For example, if your business expenses amount to 20% of your revenue ($17,000), your taxable income drops to $68,000, significantly altering your final take-home pay and overall financial picture. (Note: the ATO guidelines for 2025 tax returns are referenced earlier, so this mention is without a duplicate link.)

The Burden of Irregular Income

Perhaps the greatest financial hurdle for the self-employed is managing an irregular income. Client projects, seasonal demand, and payment cycles can cause revenue to vary dramatically from one month to the next. This inconsistency is a primary reason lenders hesitate to approve loans for sole traders. The story of Frank Farrelly, a self-employed dental practice worker in Sydney’s Darlinghurst, highlights how even a solid household income and significant savings can be insufficient when banks require at least two years of consistent financial records. This lack of a steady, predictable paycheque complicates budgeting. A substantial cash reserve is necessary to smooth out the inevitable peaks and troughs.

Strategies for Budgeting with a Variable Income

Maintaining financial health on a fluctuating income requires discipline and foresight. The key is to create systems that introduce some predictability into an inherently unpredictable financial life. By establishing robust budgeting techniques and using appropriate financial tools, self-employed individuals can build a stable foundation for their business and personal finances. Taking a proactive approach can mitigate the stress of irregular cash flow and aid in making confident financial decisions. A Salvation Army survey revealed that many low-income Australians are forced to skip meals and forgo essential items, highlighting the importance of financial stability.

Practical Tips for Managing Finances

1. Separate Business and Personal Accounts: This simplifies expense tracking, eases tax preparation, and provides a clear perspective on your business’s financial health.
2. Pay Yourself a Regular “Salary”: Transfer a fixed, conservative amount from your business account to your personal account each month. This creates the discipline of a regular paycheque while ensuring surplus cash remains available for leaner months or tax payments.
3. Build Multiple Emergency Funds: Establish two safety nets – one for 3-6 months of business operating expenses and another for 3-6 months of personal essential living costs.
4. Quarterly Tax Planning: Rather than waiting until year-end, set aside a percentage of every payment into a high-interest savings account to cover quarterly BAS and annual tax obligations.

Securing Cash Flow with Invoice Financing

A major source of stress for self-employed professionals is the gap between completing work and receiving payment. This delay, which can stretch from 30 to 90 days, creates significant cash flow challenges and disrupts personal budgeting and business operations. When payments are delayed, covering immediate expenses or paying yourself a consistent salary can become difficult.

One effective tool to bridge this gap is invoice financing. Instead of waiting weeks or months for client payments, you can sell your unpaid invoices to a third-party financier, converting them into immediate working capital. This solution, provided by firms like Royce Stone Capital in Melbourne, stabilises your income and helps maintain smooth business operations without dipping into personal savings. 

What Your Lifestyle Could Look Like on $85,000

Ultimately, the value of an $85,000 income is best determined by the lifestyle it affords and the long-term goals it enables. After accounting for taxes, business expenses, and voluntary superannuation contributions, your remaining income must cover housing, transport, food, and other living costs while ideally allowing room for savings. Although this income is significantly higher than the national minimum wage, rising living costs—particularly in metropolitan areas—can quickly erode its purchasing power. For instance, Anglicare Australia’s 2025 Cost of Living Index found that a full-time minimum wage worker has only $33 spare each week after essential costs, a stark reminder of tightening budgets.

Affording a Home and Other Major Goals

With an approximate monthly take-home of $5,584, affording a home remains a significant challenge. Lenders evaluate mortgage applications based on consistent, verifiable income – a hurdle for many self-employed individuals. Often, banks require a minimum of two years of consistent financial records and impose strict serviceability criteria. In Australia’s competitive property market, careful budgeting and a substantial deposit are key to turning the dream of homeownership into reality on this income.

Building a Savings Buffer

Building wealth on a self-employed income of $85,000 is achievable with deliberate planning. After covering living expenses and making superannuation contributions, the remaining funds may be modest for additional savings or investments. The 2025 UBS Global Wealth Report shows that Australia has the second-highest median wealth per adult globally, which indicates that with disciplined financial habits, substantial asset-building is possible over time. Creating a clear and realistic budget is the first step in setting aside money for future goals.

Sample Annual Budget: $85,000 Taxable Income

Annual Take-Home Pay (After Tax): $67,012; Monthly Take-Home Pay: $5,584

Detailed Breakdown and Strategies

1. Needs (50.5%): This category covers your core survival expenses. The largest portion is housing, at 34% of take-home pay, which is significant but manageable in Australia’s rental market. Keeping grocery costs in check by cooking at home is a key strategy to control this section.

2. Savings & Financial Goals (29.6%): This is the most critical area for a self-employed person.

• Superannuation: The budget allocates $708 monthly to super. This is calculated as 10% of the gross income ($85,000), a crucial step to avoid falling behind salaried employees who receive the Superannuation Guarantee. These contributions are generally tax-deductible as a self-employed individual, further refining your taxable income.
• Personal Savings: Saving a strong 12.5% ($700/month) allows you to quickly build the recommended 3-6 month personal emergency fund. As highlighted in the article, this cash reserve is essential to manage income volatility and provides peace of mind. Once the emergency fund is established, this allocation can be redirected towards major goals like a home deposit.

3. Wants (19.9%): A disciplined approach to wants is key.

• Health & Fitness: This budget includes private health insurance. This is often a financially sound choice for an individual earning $85,000, as it helps avoid the Medicare Levy Surcharge (which applies to incomes over $97,000 in 2024-25, but thresholds can change) and provides access to the government rebate.
• Flexibility: This category offers the most flexibility. In months when income or business expenses are lower, spending on travel, shopping, or entertainment can be temporarily reduced without impacting your core financial stability.

Adhering to a detailed budget like this can help a self-employed person in Australia successfully manage an $85,000 income, build long-term wealth, and enjoy a comfortable lifestyle.