Most owners who feel they pay too much tax are right, but not for the reason they think. The rate is the rate. What is usually wrong is the structure the business sits in, the timing of decisions, and the concessions nobody claimed. Here are the causes we see most often in Brisbane businesses, and what a proper tax planning process looks like.
The feeling usually arrives in two moments. The first is when the accountant delivers the year's tax bill in October or May, long after the profit was made and spent. The second is when a friend with a similar business mentions how little they paid. Neither moment tells you much on its own, but together they point at something real.
Australia's tax rates on companies, trusts and individuals are fixed, and nobody can change them. What varies enormously between two businesses with the same profit is how that profit flows: which entity earns it, who it is distributed to, what was deducted on the way, how much went into super, and whether any of this was decided before 30 June or after. The difference can be substantial, and it is almost all in the planning.
This page is about finding which of those levers has been left unpulled. It is not about schemes. The aim is to pay what the law requires and not a dollar more, with a position you could explain to the ATO without discomfort.
When we review a new client who believes they are overpaying, we check the same list. Most businesses have at least two of these.
None of these are exotic. They are the ordinary consequences of a business that has grown while its tax arrangements stood still.
A sole trader pays tax on every dollar of profit at their personal marginal rate. A company pays a flat rate, but the money is not yours until it comes out, and taking it out has its own rules. A discretionary trust can distribute to family members and a company beneficiary, but only if the deed, the resolutions and the timing are right. Each structure suits a different size and shape of business, and most businesses outgrow their first one.
A common pattern in Brisbane and Logan is a tradie or consultant who started as a sole trader, grew to a profit that now attracts the higher marginal rates, and never revisited the question. Moving to a company or trust structure at that point can change the tax outcome materially, and the small business restructure rollover often allows it without a capital gains tax cost. The same review protects personal assets, which is usually the second reason to do it.
Our structuring and asset protection page covers the options. The short version is that structure should be reviewed whenever profit, risk or family circumstances change, not left as it was on the day the ABN was registered.
Superannuation is the most reliable deduction an owner has. Concessional contributions are deductible to the business or the individual and taxed at a low rate inside the fund. The annual cap changes from time to time, and unused cap amounts from recent years can often be carried forward if your total super balance is under the relevant limit. We check the current figures each year and plan contributions so they are received by the fund before 30 June, not just paid.
Division 7A is where company owners most often pay tax they did not need to. Drawings from a company that are not wages, dividends or a complying loan can be treated as an unfranked dividend to the owner. The fix is to plan how money leaves the company before it leaves, using salary, franked dividends and properly documented loans in the right mix. Our Division 7A page explains it in detail.
Trusts need a distribution resolution before 30 June, and the resolution should reflect a plan: who the beneficiaries are, what their other income is, whether a bucket company makes sense this year, and what the trust deed actually allows. A resolution written in the last week of June to fit the numbers is legal, but it is rarely optimal.
A specific complaint we hear often is paying tax on money that went into stock or equipment. The business made a profit, spent it on inventory for the busy season or a new truck, and then received a tax bill for the profit as if the cash were still there.
Part of this is cash flow timing and cannot be avoided, but part of it is planning. Equipment purchases can often be deducted faster under the small business depreciation rules, provided the asset is installed and ready for use before 30 June and it falls within the threshold that applies for that year. Stock on hand is valued at year end, and the valuation method chosen affects taxable income. Prepaying certain expenses can bring a deduction forward. These decisions need to be made before the year closes, which is the whole point of planning in May rather than reporting in October.
The cash side also needs a plan. Once we know the projected tax for the year, we set a weekly or monthly transfer into a separate tax account so the bill is funded as the profit is earned. Owners who do this stop experiencing tax as a shock, and the question shifts from how to pay it to whether it is the right amount.
Tax planning is a process, not a meeting. For our business clients it runs on a calendar, and the heavy lifting happens between March and June when there is still time to act.
The same process produces a PAYG instalment review, so you are not overpaying through the year either, and a tax set-aside figure so the bill is already in the bank when it arrives. Our tax planning page goes into more detail.
There is a clear line between arranging your affairs to pay the right amount of tax and entering into arrangements whose main purpose is to avoid it. The first is what every good accountant does. The second attracts the general anti-avoidance rules, penalties and years of correspondence. We work firmly on the right side of that line, and if a scheme sounds too good, we will say so.
Timing is the other half. Almost every tax saving available to a business has a deadline, and most of them fall on 30 June. A super contribution received on 2 July, a trust resolution signed in August or a loan agreement drawn up after the company return is lodged does not do the job. Owners who feel they pay too much tax usually have not been given the chance to act in time.
That is fixable, and it starts with a conversation well before the end of the financial year. We work with clients from our Victoria Point and Jimboomba offices and across Australia by video.
Usually because the structure no longer fits the profit, decisions are made after 30 June when nothing can change, or available concessions and super contributions were never used. Company owners also pay unnecessary tax when drawings fall foul of Division 7A. A review of structure, timing and concessions almost always finds something, and the fix is planning rather than any clever scheme.
There is no single answer. Sole traders pay at personal marginal rates, companies pay a flat rate with rules about taking money out, and discretionary trusts allow distributions across family members and a company. The right choice depends on profit, how much you need to live on, risk and future plans. Most businesses outgrow their first structure and should review it when profit grows.
March to May is ideal. By then there is enough of the year to project the result accurately and still enough time to act on it. Super contributions must reach the fund, trust resolutions must be signed and assets must be installed before 30 June. Planning in late June is rushed, and planning after 30 June is just reporting what already happened.
Yes, within the concessional contribution cap, which changes from time to time. Contributions are deductible to the business or to you personally and taxed at a lower rate inside the fund. If your total super balance is under the relevant limit, unused cap amounts from recent years can often be carried forward. The contribution must be received by the fund before 30 June to count for that year.
Yes. Tax planning means arranging your affairs within the law to pay what is required and no more, using structures, concessions and timing that Parliament deliberately provided. It is different from tax avoidance schemes, which have no purpose other than reducing tax and attract anti-avoidance rules and penalties. A good accountant stays well within the first category and tells you when something crosses the line.
It can, by allowing income to be distributed among family members and to a company beneficiary according to a resolution made before 30 June each year. The benefit depends on who the beneficiaries are, their other income and what the trust deed permits. Trusts also carry their own compliance obligations and Division 7A considerations when a company beneficiary is not paid, so they need to be managed properly.
