What Is Tax Planning for a Business and Why Is It Important?
A guide to tax planning for small businesses in Australia
Why Business Tax Planning Matters
If you’re a small or medium-sized business (SME) in Australia, business tax planning isn’t just about staying compliant, it’s a powerful tool to grow, scale, and safeguard your financial future.
Tax planning is all about managing expectations around tax. This process gives you the opportunity to consider your tax payable and any actions you could take to reduce it.
At Kindred Accounting, we help Australian SMEs unlock tax savings and avoid nasty surprises at EOFY.
Let’s dive in and answer some common questions we get about tax planning for businesses in Australia.
FAQ #1: What Is Business Tax Planning?
Business tax planning is the process of legally minimising your business’s tax obligations through smart financial decisions and planning. It involves reviewing your structure, income, deductions, and future goals to create a year-round strategy, to make sure all the boxes are ticked.
Getting these things right may not save you, but getting them wrong will cost you.
Tax planning can:
Help with your timing and decision making (things like, when it would be appropriate to buy a car / building etc)
Ensure last year's tax bill is paid (so you can pay a franked dividend)
Address professional profit allocations (if applicable)
Complete your trust resolution so that the profits are distributed as you intended
Maximise your after-tax profits (the money that actually lands in your pockets)
Improve cash flow throughout the year
Ensure you're taking advantage of government incentives and deductions
Minimise any surprises and give you peace of mind knowing you can afford your tax bill
FAQ #2: Why Does My Business Need Tax Planning?
Many Australian business owners miss out on tax savings simply because they leave it too late. With effective tax planning, you can:
Avoid overpaying tax
Claim all eligible deductions (like super contributions and business assets)
Reduce tax liabilities with smart timing
Access small business tax offsets and grants
Prepare for ATO obligations well in advance
Make sure your trust obligations are prepared, distributed appropriately and complying with ATO rules
FAQ #3: When Should You Start Tax Planning?
April-June is prime tax planning time, but the earlier the better, and definitely well BEFORE June 30 so you don’t miss the end of financial year deadline.
Starting earlier in the year allows you to map out your income and expenses, track your performance against forecasts, and implement effective tax strategies.
FAQ #4: What Are the Best Tax Planning Strategies for Australian SMEs?
Here are some business tax tips we might recommend to our clients (remembering that everyone’s situation is unique and there are no “one size fits all” answers here):
1. Use the Right Business Structure
Whether you're a sole trader, partnership, trust, or company, the structure impacts your tax rate, liabilities, and flexibility. Restructuring at the right time could save you thousands in tax.
Make sure you are asking your qualified business accountant (us!!) if you should be making any changes - every situation is different so make sure you have the right advice for you before you jump into anything.
2. Claim All Business Deductions
As long as you have receipts, Australian SMEs can claim deductions on:
Office expenses (including home office for hybrid workers)
Travel and vehicle use
Accounting and legal fees
Employee superannuation (this needs to be paid prior to 30 June though to be able to claim a deduction for it)
Employee bonuses (these need to be “incurred” - so you need to communicate and commit to the bonus to staff prior to 30 June)
Marketing, training, and technology tools
Equipment purchases (if you're buying a new asset/equipment you need to physically have it prior to 30 June to be able to claim the deduction)
3. Prepay Expenses and Defer Income
Bringing forward costs (e.g. subscriptions or rent) and, where appropriate, deferring invoices until July can reduce your current year’s taxable income.
4. Invest in Super Contributions
Concessional super contributions (including utilising prior year unused concessional contribution caps) could be a great option to consider for lowering your taxable income while investing in your future - bearing in mind that each situation is unique, of course.
*It’s important to remember that putting money into superannuation can help you reduce your tax bill, and will be beneficial in the long run, but you also can't access your super until you meet a condition of release (conditions typically include reaching preservation age and retiring, reaching age 65, death, or other circumstances like severe financial hardship, terminal illness, or incapacity).
5. Access Tax Incentives
The ATO offers tax offsets and rebates for eligible small businesses, including:
Small Business Income Tax Offset
R&D tax incentives
State-based grants for specific incentives
Ask your accountant how and if you can take advantage of these incentives at your tax planning meeting.
FAQ #5: What’s the Difference Between Tax Planning and Tax Preparation?
Tax planning is proactive - done throughout the year to minimise what you owe.
Tax preparation is reactive - done at the end of the year and should be the process of capturing what we did as a result of tax planning.
By focusing on planning, you cantake control of your tax outcomes, instead of just reacting to them.
FAQ #6: Can Tax Planning Help with Cash Flow?
100% yes - planning your tax allows you to spread liabilities, set aside funds in advance, and avoid unexpected tax debt. This is especially important for businesses with quarterly BAS or PAYG instalments.
We’re just going to say it… If you get an unexpected tax bill - you’re not in control of your business.
Make Tax Work for You
Tax planning doesn’t have to be complex, but it does need to be consistent. At Kindred Accounting, we make tax planning simple, proactive, and aligned with your business goals.
By talking about your personal and business goals, we take your whole picture into account so you’re paying the right amount of tax for your situation (read here why reducing your tax payable isn’t always the best course of action).
Click hee to chat to us about how we can help your business keep more of what it earns, legally.
We’re passionate about empowering business owners to make confident & informed money decisions - all year round.
