Get Ahead with Your Own DIY Small Business Tax Planning Tips

Get Ahead with Your Own DIY Small Business Tax Planning

Proactive tax planning can make a significant difference to your small business’s cash flow, tax bill, and overall financial confidence. If you’ve never gone through a formal tax planning process with your Morrows accountant or tax advisor before, you may be wondering: can I do anything myself before calling in the experts?

The short answer is yes, but like most things in business, the more you know, the more you realise how important professional advice becomes.

Our tax advisors have prepared the following tips as a starting point, to help you take the first steps:

1. Estimate Your Taxable Income

Start by pulling a Profit and Loss report from your accounting system (Xero, MYOB, QuickBooks) for July through to April (or the most recent month you’ve reconciled). Then, estimate your income and expenses for the final months of the financial year based on your pipeline and usual spending.

Getting a realistic (not perfect) picture of your annual profit is key.

2. Understand Your Effective Tax Rate

If your business is a company, your tax rate is usually a flat 25%.
If you’re a sole trader, your business profit is taxed at your personal income tax rates, which include the Medicare Levy.
To estimate your total tax, use the Moneysmart Income Tax Calculator. Once you have your total tax (including Medicare Levy), divide it by your income to find your effective tax rate. This shows how much tax you’ll save for every extra $1 of deductions.

For example, if your effective tax rate is 30%, for every $1 of deductions, you save 30 cents in tax. So, a $5,000 deduction (for example deducting obsolete stock) would save you $1,500 in tax ($5,000 x 30%).

3. Identify Additional Tax Deductions

Some strategies to consider before June 30 include:

• Instant asset write-off: Buy and install eligible assets under $20,000 before June 30. Make sure the assets are installed and ready for use by June 30. Read more in our instant asset write-off article.
• Early super payments: Pay employee super contributions before June 30 to bring the deduction into this financial year.
• Top up your own super: Subject to contribution caps and your overall wealth plan. Remember that the concessional (tax-deductible) cap is $30,000 for the 2024–25 year and if you haven’t utilised your full cap limit in previous years, you can carry forward the unused portion for up to five years. Learn more about this in our voluntary super article.
• Write-off bad debts:  If you have any invoices that haven’t been paid and are not likely to be paid, write them off before June 30. This ensures you don’t pay any tax on income you haven’t received. It’s important however that you attempt to recover the debt and that you keep documentation to prove this.
• Write down obsolete stock: Make sure you do a stocktake and write off any outdated or damaged or obsolete stock.
• Prepay expenses: Certain business expenses paid in advance may be immediately deductible.

Make sure you complete the form below to download our tax minimisation guide for an extensive list of deductions that may be applicable to your business.

Final Thoughts

DIY business tax planning gives you greater visibility, but it’s only part of the puzzle.
There are more complex strategies around company tax structures, Division 7A loans, trust distributions, and capital gains that can significantly affect your outcome, and that’s where your Morrows advisor can help.

Ready to Boost Your Tax Savings? How Morrows Can Help 

Navigating tax for your business can be complex. Our team at Morrows can help you evaluate what strategies are right for you and guide you through structuring an effective plan. 

Contact Morrows today on 03 9690 5700, so we can get started.

Want to learn more Tax Minimisation Strategies? Download our Tax Guides

We’ve created two Tax Planning Guide to help you and your business be better prepared.

And if you’re ready to take the guesswork out of it completely, our team is here to help you design a personalised tax strategy for your business.

Fill in your details below, to gain access to these guides for free.