5 Tax Planning Strategies to Reduce Your Small Business Tax Burden in Australia

5 Tax Planning Strategies to Reduce Your Small Business Tax Burden in Australia

Small Businesses form the backbone of the Australian economy. With constantly changing tax laws, small businesses find it tough to keep up with the latest trends and developments and identify key changes to reduce their tax burden. But don’t worry! In this blog post, we shall discuss 5 tax planning strategies to reduce your small business tax burden in Australia. 

#1 Prepay Expenses

The first thing which small businesses can do is prepay their expenses. They can easily pay their expenses like insurance, rent, and subscription which will reduce their tax liability. Up to 12 months’ worth of tax-deductible costs can be paid in advance to accelerate the tax deduction to the current fiscal year. This will benefit you as you can claim these deductions in the current financial year even if they relate to the following financial year. While doing so, make sure you don’t impact negatively your cash flow. 

#2 Claim Deductions 

You can claim various expenses incurred in running your business. Plus, you can also claim a few which have not even been paid at the end of the financial year. For example, you can claim expenses such as staff salary and wages, staff bonuses, and also the repair and maintenance costs that come along. Along with this, don’t forget to claim depreciation of assets, bad debts, and motor vehicle expenses. Make sure you keep yourself updated with the tax laws and regulations to ensure that you are claiming all deductions. 

#3 Utilise the Instant Asset Write-off

Small businesses in Australia can simply use the asset write-off to claim an immediate deduction for assets purchased by them for their business use. This they can do in the circumstance which the asset is first used or installed ready to use. The maximum threshold has been increased to $150,000. This means that small businesses can claim an immediate deduction for assets purchased for business use that cost less than $150,000.

Small businesses have to apply the simplified depreciation rules to claim the instant asset write-off. They cannot be used for assets that have been excluded from those rules. But this strategy is useful as it can reduce small businesses’ taxable income and increase their cash flow. 

#4 Keep Accurate Records

Our penultimate strategy is a common one and is also among the most essential ones for small businesses in Australia. Keeping accurate records means you need to ensure you have kept receipts and invoices for all expenses incurred in running your business. Also remember that the better tax records you have, the more deductions you can procure. This is also beneficial in another way as with proper records, you can easily deal with the ATO if in case they have any queries. 

#5 Claim Home Office Deduction 

This strategy might work well for small businesses that operate regularly from home. For the 2021 fiscal year, the ATO has released a short-cut deduction technique that enables taxpayers to deduct 80 cents for each hour they work from home. But if you apply this short-cut deduction technique, you cannot claim the expenses related to your internet, phone, utilities, and depreciation. To claim these expenses, small businesses need to keep accurate records of their home office usage and ensure that the expenses are legitimate business expenses.


So, these are the top 5 tax planning strategies that can reduce the small business tax burden in Australia. But at the same time, it is crucial to seek professional advice before implementing any of one these strategies. And for this, you can certainly rely on KPG Taxation which is an experienced taxation company in Australia that has quality tax accountants and agents who will help small businesses to navigate their tax strategies and maximise their deductions. 

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