Top Tax-Planning Strategies for Small Business Owners

Looking to adopt tangible tax-planning strategies for your business? Read on for some handy hints to help you save.

Pay less tax.

It’s what most of us aspire to do each year—with increased urgency when the time nears for the Australian Taxation Office (ATO) to come calling for its annual donation.

Fortunately, there are several ways to achieve this aim.

That’s especially the case for small business owners and entities, who can employ a range of smart tax-planning strategies to minimise their bill.

And the best time to take advantage is always sooner rather than later.

To get you started, here are a handful of tax-planning strategies we have successfully implemented for our clients in the past.

1. A Trust Can Help You Pay Less Tax 

The ATO has made small but significant changes to company tax rates over the past few years.

While the full company tax rate of 30% is still applicable to major corporations, that rate has gradually been declining for small businesses recently.

If you’ve been operating a small business entity for all or part of 2024, the tax rate for base rate entities under the threshold is now 25%.

That’s contingent on 80% or less of your company’s assessable income consisting of passive income—or in other words things like rent, royalties, interest dividends, and net capital gains.

But there’s more you can do than just write off depreciable assets, particularly if you’re using the tax advantages of a trust. One strategy is to allocate profits to a bucket company. 

In simple terms, that’s a company set up as a beneficiary for a trust into which you can pour money to reduce tax.

As long as you’re engaged in some form of business operations, you can tip the profits into your bucket company and ensure your tax is capped at that corporate rate of 25%. 

That’s a much lower rate than the 45% charged on individuals who earn more than $180,000 of taxable income.

Strategic moves to use a bucket company can ultimately save small business owners thousands in the long run.

2. Take Advantage of Asset Write-Offs

Leveraging instant asset write-offs is one of the most consistently reliable tax-planning strategies. 

You just need to be across the latest rules.

As part of the 2023-24 Federal Budget, delivered last May, the Government announced it would be temporarily increasing the instant asset write-off threshold to $20,000—applicable from 1 July 2023 until 30 June 2024.

This was aimed at enhancing cash flow and reducing compliance for small businesses.

In short, the rule means small businesses with aggregated turnover of less than $10 million are able to deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

The $20,000 threshold applies on a ‘per asset basis’, meaning these businesses can instantly write off multiple assets.

Assets valued at $20,000 and beyond—which cannot be immediately deducted—can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

It can be challenging to keep up with what seems like constantly changing instant asset write-off rules—which is where the team at PrimeAdvisory comes in. 

Instead of scrutinising every rule and regulation on the ATO website, simply get in touch and we can walk you through the smartest write-off strategies to reduce your tax bill.

3. Pay Super, Defer Income

Paying less tax involves various tactics, including returning to a few proven tax-planning strategies to help reduce your bill even further. 

One of these strategies is maximising deductible super contributions by paying up to the relevant individual ‘caps’.

Note that from 1 July 2024, contribution caps are set to rise—the first increase in three years.

As of this date, concessional super contributions will increase from $27,500 to $30,000, and for non-concessional contributions from $110,000 to $120,000.

Just remember not to exceed the relevant amounts, otherwise you’ll actually end up paying more tax.

You’ll also need to ensure all employee superannuation payments are received by the nominated super fund or Small Business Superannuation Clearing House (SBSCH) by 30 June. 

A note of caution: make those payments in advance, because any delays can result in them being processed in the new financial year—thereby eliminating the immediate tax benefit.

Among other tax-planning strategies is purchasing tools of trade and other fringe-benefit-tax-exempt items before the end of the financial year—as is taking care of any repairs and maintenance.

Additionally, deferring income until the next financial year also helps delay tax payable for an additional 12 months.

Need Help With Your Tax-Planning Strategies?

While these are all well-known tax-planning strategies, there’s complexity to shrinking your annual tax bill.

That’s why speaking to a professional is one of the smartest investments you can make—and why PrimeAdvisory has you covered.

We’ve been helping small businesses pay less tax for years and we can help you do the same.

If you’re after even more expert tax-planning strategies—always accounting for the latest changes—get in touch.

Drop us a line or call us on +61 02 9415 1511 to find out how we can help.

Or take a look at our expert tax planning guides.

We make more possible.