Let’s be real. Managing your money doesn’t have to feel like a drain. Whether you’re a tradie hanging tools at the end of the day, a freelancer firing up the laptop, or a small business owner juggling a dozen things, a good budget can free you up to focus on what you’re really good at.
And with the ATO’s latest tax changes for the years ahead, now’s a smart time to get your budgeting in shape.
Quick Summary
- Track your income and expenses every month (fixed and variable alike).
- Update your budget to include recent ATO tax-bracket changes (from 2024-25 / 2025-26).
- Prioritise savings and debt-reduction before discretionary spending.
- Stay organised with receipts, deductions and tax planning, especially if you’re a freelancer or sole-trader.
In this guide we’ll walk through: calculating your income, mapping expenses, accounting for tax, setting savings goals, and keeping things flexible. We’ll also drop some “Pro Tax Tips” for freelancers and small business folks.
Why now is a great time to revisit your budget
2025 brings fresh terrain. Tax brackets have shifted, cost-of-living pressures are real, and whether you’re earning casual income or running a business, you’ll benefit from knowing exactly where your money’s going.
The ATO’s rates for 2024-25 and 2025-26 show that for Australian residents:
- $0 – $18,200 = nil tax
- $18,201 – $45,000 = 16 % on the excess over $18,200
- $45,001 – $135,000 = $4,288 + 30 % of the excess over $45,000
- $135,001 – $190,000 = $31,288 + 37 % of the excess over $135,000
- $190,001 and over = $51,638 + 45 % of the excess over $190,000
What this means: your budget needs to factor in the tax you’ll owe (or set aside) and for freelancers/sole-traders, that means proactively planning rather than just winging it.
Step 1 – Calculate your income
Start by getting clear on how much is coming in. If you’re on a wage or salary, just look at your regular pay. If you’re a tradie with seasonal jobs, a freelancer, or you get income from multiple streams, average things out over 3–6 months.
Pro tip:
Create a spreadsheet (or use an app) listing:
- Regular income (payroll, retainer)
- Side-hustles or casual jobs
- Interest or investment income
- Any other odd jobs
That gives you your monthly income baseline. If you’re growing your side hustle or business, you might need to project-forward too (e.g. income in next 6–12 months).
Step 2 – Calculate your expenses
Fixed expenses
These are the ones you pretty much know:
- Rent/mortgage
- Utilities (power, water, gas)
- Phone, internet
- Insurance (car, home, business)
- Loan repayments or credit card minimums
- Subscriptions (streaming, software)
- Superannuation and retirement savings (set as expense, more on that later)
Variable expenses
These vary month by month:
- Food/groceries
- Fuel, car servicing
- Eating out, entertainment
- Clothing, hobbies
- Home maintenance and repairs
- Unexpected costs (doctor visits, equipment replacement)
Work out what you spend in a typical month (or average over 3–6 months). Add fixed + average variable = your baseline monthly spending.
Why you don’t want your in-comings to equal your out-goings
If you bring in $5,000 a month and your expenses (fixed + variable) are also $5,000, you’ve got no margin. That means no buffer for savings, no debt pay-down, and no “just in case” money. The goal is to bring expenses under income.
Step 3 – Plan for savings, debt and the taxman
Savings & goals
Before you let spare cash disappear into “whatever”, treat savings (and debt reduction) as part of your fixed expenses.
Think of it this way: if you earn $5,000/month, budget $300/month into your savings or superannuation. Then you live off the remaining $4,700.
Set goals:
- Emergency fund (3–6 months of expenses)
- Holiday or new gear
- Home deposit
- Business investment
- Retirement fund
Debt reduction
Make a plan if you’ve got a credit card, loan or business debt. Pay more than the minimum where possible. Reducing the principal sooner frees up future cash flow.
Tax planning
If you’re on PAYG (pay-as-you-go salary), your employer handles withholding. But if you’re self-employed or have irregular income:
- Set aside a portion of your income into a separate tax account.
- Use the ATO’s tax tables so you don’t get a nasty shock. Australian Taxation Office+1
- Keep in mind that tax is not “optional”. It’s a cost of earning.
Pro Tax Tip #1: If you’ve got fluctuating income, open a dedicated “tax savings” bank account and transfer a conservative estimate each time you get paid.
Pro Tax Tip #2: Don’t wait until June to think about taxes. Review quarterly so you’re never caught short.
Step 4 – Discretionary spending
Now you know your income, fixed expenses, savings/debt, tax provisions, what’s left?
That’s discretionary spending: the fun stuff. But this is also where budgets often go off the rails.
Take a look at your variable spend. If you realise you’re doing $200/week on take-away coffees and lunches out, you may decide to reduce to $120/week and funnel the $80/week saved into either savings or debt reduction.
It’s better to reduce discretionary spending before cutting into savings or upping debt.
Step 5 – Review and refine (budgeting is an ongoing process)
Too many people see a budget as “set and forget”.
News-flash: it evolves. Life changes (new job, family, contract, big expense). So allocate 5 minutes at the end of each week (or 30 minutes each month) to scan your bank accounts:
- Did you spend more than budgeted on variable costs?
- Did you stay on track with savings?
- Is your tax reserve still on track?
- Are your goals still relevant?
Make tweaks as needed. A budget that sits in your drawer gathering dust does zilch.
The updated tax landscape (what you need to know)
Because you’re budgeting in 2025, let’s cover the recent updates from the ATO and beyond.
- The tax-free threshold remains $18,200
- The 16% rate applies to income between $18,201 and $45,000 for 2024-25 and 2025-26
- From 1 July 2026 the rate for that bracket will reduce further to 15% and then to 14% from 1 July 2027 (subject to legislation).
- Medicare levy (2%) still applies for most taxpayers.
- If you’re a freelancer/sole-trader you’ll still need to allow for tax, super contributions and possibly GST registration.
Pro Tax Tip #3: Plug your estimated taxable income into a tax calculator (or consult with us at ITP) early in the year, so you know how much to set aside.
Budgeting for freelancers, sole-traders and small business owners
If you fall into this category, you’ve got a few extra balls in the air:
- Irregular income = larger swings. Use a conservative average for income.
- Business expenses = Yes, it’s deductible, but you still need to budget tax on net profit.
- Superannuation: make sure you’ve got a plan to contribute (and claim).
- Receipts and records: the ATO may ask for proof of your claims up to 5 years after lodging.
- Consider paying tax quarterly via PAYG instalments if your income is high or volatile.
Pro Tax Tip #4: Use a cloud accounting system so when it’s tax time you’re not scrambling and your budget has accurate numbers.
Putting it all together (a sample budget for one month)
| Category | Amount (AUD) |
| Income | $5,500 |
| Fixed expenses (rent/mortgage + utilities + insurance + subscriptions) | $2,200 |
| Savings/debt reduction | $400 |
| Tax-reserve (based on estimated annual taxable income) | $550 |
| Variable expenses baseline | $600 |
| Discretionary spending (fun stuff) | $300 |
| Buffer/contingency | $450 |
In this scenario you’re living off $3,800. You’re saving, you’re setting aside tax, you’ve got buffer money and you’ve still got fun money. Not bad.
What to do next
- Pull up your last 3 months of bank/credit-card statements.
- Work out your average monthly income & expenses.
- Decide on one savings goal and one debt-reduction goal.
- Open a tax-reserve account (if you don’t have one).
- Review quarterly.
- When in doubt, give your friendly experts at ITP a call.
Stop Stressing, Start Saving
Budgeting doesn’t mean giving up the things you enjoy. It means making your money work for you. With the updated tax-bracket info from the ATO, a realistic plan for savings, debt and fun, and a bit of diligence, you’ll be setting yourself up for life (not just for next month).
If you’re feeling unsure about how to factor tax into your budget, how to structure your business finances, or just want someone to walk you through it, get in touch with us at ITP.
We’ve been helping Aussie individuals and businesses for over 50 years, and we’d love to help you take control of your financial future.
Let’s get your budget working, not the other way around.
Frequently Asked Questions (FAQ)
How often should I update my budget?
Ideally, review your budget monthly and after any major financial change (new job, business expense, or lifestyle shift). A quick weekly scan helps keep spending on track too.
I’m a freelancer with irregular income — how do I budget effectively?
Average your income over the last 3–6 months to create a “baseline”. Always set aside a percentage for tax and savings after every payment to avoid end-of-year stress.
What percentage of my income should go to savings?
A common rule is the 50/30/20 method — 50% needs, 30% wants, 20% savings or debt reduction. But if you’re self-employed, consider adjusting for tax and super contributions first.
Do I need a separate bank account for taxes?
Yes, it’s highly recommended. A dedicated tax-reserve account helps you set aside funds regularly so you’re not caught short at tax time.
How do I know how much tax to set aside if I’m self-employed?
You can use the ATO’s tax tables or an online calculator. As a general guide, set aside 25–30% of your income (including GST if applicable). For accurate planning, consult a registered tax agent like ITP.
Are business expenses like tools, software, or travel tax-deductible?
In most cases, yes — if the expense directly relates to earning your income. Keep detailed receipts and records for at least five years in case the ATO requests proof.
What’s the difference between fixed and variable expenses?
- Fixed: Rent, utilities, insurance — predictable each month.
- Variable: Groceries, fuel, dining out — fluctuate based on lifestyle.
Budgeting helps you control the variable ones.
How can I stay consistent with budgeting long-term?
Automate where possible — savings transfers, bill payments, and even reminders. Use a budgeting app or cloud accounting tool to simplify tracking.
Should I include superannuation in my budget?
Absolutely. Treat your super contribution as a fixed expense — it’s part of your long-term savings and future security.
What’s a realistic first step if I’m just starting?
Start simple:
- Track your income and expenses for one month.
- Open a savings and tax account.
- Set one small goal (e.g. save $500 in 3 months).
Small wins build financial momentum.
Disclaimer: The information in this article is general in nature and does not take into account your personal circumstances. Always seek professional advice from a qualified tax consultant or financial adviser before making financial decisions.