Paying less tax starts with understanding what your business can legitimately claim. Good planning helps you avoid missed deductions without spending money unnecessarily.
If you’re researching how to pay less tax as a small business in Australia, start with your circumstances. Your structure, turnover and expenses determine which strategies apply.
Legal tax minimisation uses deductions and concessions within the law. Hiding income is tax evasion. Artificial arrangements may trigger tax avoidance rules.
These twelve steps can help you make informed decisions and protect your cash flow.
1. Claim All Eligible Business Expenses
Review expenses throughout the year rather than relying on memory at tax time.
Potential deductions include business insurance, accounting fees, advertising, software subscriptions and relevant operating costs.
The expense must relate to earning business income. Private spending is not deductible, while capital expenses may follow different rules.
Separate mixed expenses into business and private portions. Keep evidence showing how you calculated each claim.
A tax deductions checklist can help identify overlooked categories. However, eligibility depends on your circumstances, not simply the expense label.
Check whether amounts include GST credits you can claim separately.
2. Keep Accurate Records of Mixed Expenses
Phone bills, internet costs and vehicle expenses often involve business and personal use.
Claiming everything can overstate deductions. Claiming nothing may mean paying more tax than necessary.
Use an appropriate method to establish business use. Keep bills, travel records and supporting calculations.
Vehicle deduction methods differ between sole traders and companies. A logbook may help where the relevant method requires one.
Keep business and personal banking separate where practical. Clear records help your tax agent identify legitimate claims.
They also make it easier to explain your deductions if the ATO asks questions.
3. Review Your Business Structure
Your business structure affects how profits are taxed and how you access money.
A sole trader pays tax at individual rates. Companies and trusts operate under different rules.
Changing structure can create costs, tax consequences and additional obligations. Consider liability, administration, succession and expected profits alongside tax.
Professional business advice can help assess these factors together.
Do not assume a company automatically lowers your overall tax. The outcome depends partly on how profits reach you.
Review your structure as the business grows, rather than changing it solely for an advertised tax saving.
4. Prepay Suitable Business Expenses
Eligible businesses may claim an immediate deduction for certain prepaid expenses under the 12-month rule.
Generally, the service period must not exceed twelve months or extend beyond the following income year.
Potential examples include qualifying insurance and subscriptions. Different rules apply to some payments and arrangements.
Check eligibility before prepaying expenses. Bringing a deduction forward changes its timing; it does not necessarily create an additional deduction.
Protect your cash flow. Paying early only makes sense when the expense is genuine, useful and affordable.
Keep the agreement and invoice showing the period covered.
5. Use Asset Deductions Correctly
Depreciation spreads deductions for eligible business assets over time. Some small businesses can instead claim an immediate deduction.
From 1 July 2026, eligible businesses using simplified depreciation can write off qualifying assets costing less than $20,000 each.
Aggregated turnover must be below $10 million. Other eligibility conditions and exclusions apply.
The asset must be first used or installed ready for use in the relevant income year. Ordering or paying alone is insufficient.
Claim only the business-use portion. Buying equipment you do not need usually costs more than the tax saving.
6. Plan Superannuation Contributions Carefully
Eligible superannuation contributions can provide deductions, but timing and contribution caps matter.
Business owners considering personal deductible contributions should check eligibility and complete the required notice-of-intent process.
Obtain the fund’s acknowledgement before claiming the deduction. Employer contributions follow separate requirements.
Payday Super began on 1 July 2026. Employers should follow current payment rules rather than older quarterly routines.
Confirm when contributions must reach the fund for the intended deduction.
Super generally remains preserved until release conditions are met. Consider working capital needs before making additional contributions.
7. Write Off Genuine Bad Debts
Review unpaid invoices before EOFY. Some debts qualify for a bad debt write-off when recovery is genuinely unlikely.
Generally, the amount must previously have been included in assessable income, unless another qualifying rule applies.
Write the debt off during the relevant income year and retain supporting records.
An overdue invoice is not automatically a bad debt. Document recovery efforts and why you consider it unrecoverable.
Businesses recognising income only when received generally cannot deduct an unpaid sales invoice that was never assessable.
Check any separate GST adjustment requirements.
8. Check the Small Business Tax Offset
The small business income tax offset can reduce eligible individuals’ tax by up to $1,000 annually.
It generally applies to qualifying unincorporated business income where aggregated turnover is below $5 million.
The offset equals 16% of the tax attributable to eligible net small business income, subject to the cap.
It is not 16% of turnover or profit. Companies cannot claim this individual offset.
Accurate income and expense reporting helps establish the correct entitlement.
Ask your tax agent to check whether your business income qualifies, including eligible partnership or trust income.
9. Review Company Tax and Franking Credits
Eligible base rate entities generally pay a 25% company tax rate. Other companies generally pay 30%.
Turnover and passive income conditions affect eligibility. Being a small company does not automatically qualify you for the lower rate.
Franking credits recognise company tax already paid when eligible shareholders receive franked dividends.
However, dividends may create further personal tax depending on the shareholder’s circumstances.
Use taxation servicesto review company tax, dividends and shareholder payments together.
Avoid treating company money as personal funds without understanding the consequences, including potential Division 7A issues.
10. Review Trading Stock and Business Losses
Check stock that has become damaged, outdated or difficult to sell.
Trading stock valuation rules may allow an appropriate lower value where supported by the facts.
Document quantities, condition and valuation evidence. Do not reduce stock values simply to achieve a preferred tax result.
Also review eligible business losses and whether you can use or carry them forward.
Different restrictions apply to individuals and companies. A loss does not automatically offset every other income source.
Confirm the applicable rules before including losses in your tax forecast.
11. Time Genuine Transactions Appropriately
Small business tax planning includes reviewing when expenses arise and income becomes assessable.
Your accounting method and legal obligations determine the correct treatment.
Do not hide income, backdate documents or delay recognising amounts that are already assessable.
These tax planning tips explain why reviewing your position early matters.
Timing strategies may defer tax rather than permanently reduce tax liability.
Compare the cash flow benefit with commercial needs. Delaying an important sale or prepaying an unnecessary expense can undermine the intended benefit.
12. Arrange a Review Before EOFY
Useful end of financial year tax tips depend on accurate forecasts.
Review expected profit, cash reserves, upcoming purchases and small business tax concessions before 30 June.
For tax planning in Sydney, UBS Accountants can help assess suitable options.
Contact Usto discuss your business circumstances and prepare a practical plan.
Conclusion
Pay less tax by claiming eligible expenses, checking concessions and planning ahead.
Choose strategies that support your business goals. A deduction should never come at the expense of sound financial decisions.