With the arrival of the end of the financial year (EOFY), small business entities have access to a number of concessions to help reduce their taxable income and make tax administration easier.
To help you prepare, we asked Adrian Raftery, director of Mr Taxman and author of 101 Ways to Save Money on Your Taxes – Legally!, to share eight smart EOFY tax-minimizing moves every small business owner should know.
1. Eliminate obsolete stock or plant/office equipment and write off these bad debts.
Do you have old facilities or office equipment that needs upgrading, inventory that your business can’t sell, or customer invoices that will never be paid?
“Cancel it physically before June 30 and get a tax deduction this year.
“You can value trading stock at the lower of actual cost, replacement cost, or market sale value. A different valuation method can be applied to each trading item. Similarly, bad debts can be written off with customers facing financial difficulties during this lifetime cost. For your business to get a bad debt tax deduction, you must write off the debt by June 30.
“The debt must have originally been shown as income for the write-off to be allowed. Put your decision in writing, such as a board minute. You must also show that you have made a genuine attempt to recover the debt,” says Dr Raftery.
2. Buy any new business asset and claim it as a tax deduction this year.
There have been some great tax breaks for small businesses in recent years, including the immediate write-off available for the purchase of new business assets costing less than $20,000.
“There is no limit to the number of assets you can buy with this concession, but be aware that you only get a percentage and your cash flow will suffer. If your business is registered for GST, the threshold is effectively $21,999, as you can claim the 10% GST credit (up to $2,000) and get an immediate balance for this year’s tax write-off.
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3. Build your nest egg faster by paying 15% instead of 47% tax by sacrificing salary to super.
Salary sacrifice in retirement is one of the best and most legitimate ways to minimize your income tax bill. Small business owners can have their business contribute up to $30,000 a year in super, which is only taxed at 15% within the fund and claim a tax deduction for the contribution (25% for small businesses and potentially 47% for sole traders).
“To get a tax deduction in this financial year for any superannuation contribution (including other non-linked employees), the superannuation fund must receive the contribution by 30 June. And if your super balance was less than $500,000 on 1 July 2025, you can carry forward up to $137,500 of unused amounts from that previous tax year up to make a maximum contribution from five previous years ($25,000 in 2020/21; $27,500 in 2021/22, 2022/23 and 2023/24; $30,000 in 2024/25).
“For those with superannuation balances over $3 million, now is a good time to start planning for the new Division 296 tax which will come into play on 1 July 2026,” advises Dr Raftery.
4. Postpone income and advance expenses up to 12 months in advance.
“It’s always a good idea to try to defer your taxable income to the next financial year (except when the marginal tax rate increases). For those who operate in cash, you just need to delay the ‘receipt’ of the income. If you operate without cash, you may want to defer your invoicing until next year.
“SBEs have an immediate deduction for prepayment of allowable deductions such as lease payments, interest, rent, business travel, stationery and bulk packaging, insurance and subscriptions up to 12 months in advance,” suggests Dr. Raftery.
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5. Split your income with your lower-earning spouse and pay less tax as a family.
“Too often I see business owners paying 47% tax on income, which could be passed on to their spouse (0% or 16%) or business (25%) with less tax. Bear in mind that if you pay your spouse a salary from your business, make sure you can justify the amount paid based on the time and skills required,” advises Dr Raftery.
6. Claim a deduction for unpaid expenses at the end of the financial year.
“Just because you haven’t paid something doesn’t mean you can’t claim it. Businesses are entitled to an immediate deduction for certain expenses that have been ‘incurred’ but not paid by June 30,” explains Dr Raftery.
This includes:
- Salary and wages – claim the number of days that workers have worked until June 30, but have not been paid until the new financial year.
- Directors’ fees – request a tax deduction for the fees of directors who are “definitely committed” by June 30 and have adopted the appropriate payment approval agreement.
- Office equipment and other office expenses – apply for a tax deduction on stationery, computer consumables or furniture such as Winc Access Copenhagen Mid Back Chair Black with Fixed Arms before June 30, as the company necessarily incurred the expense before year-end and has an obligation to pay.
- Staff bonuses – request a tax deduction for the gratuities and staff commissions that are due and unpaid by June 30 when the company is “definitely committed” to the expense.
- repairs and maintenance – claim for repairs carried out and invoiced before June 30 but not paid for until next year.
7. Draft your family trust resolutions before June 30.
“After years of abuse, it is mandatory for people with family (or discretionary) trusts to have a written trust resolution by June 30 showing the intended distribution of income to family members. If you operate under a trust structure, careful tax planning is required, otherwise it could cost your family thousands in unnecessary (and unwanted) taxes, as Dr RaarATO says.
8. Private company loans to shareholders.
“If you have borrowed funds from your company, please ensure that the appropriate principal and interest payments are made by 30 June. Failure to comply with the ATO’s strict rules will result in the full amount of the loan being treated as a non-exempt dividend paid and taxed at marginal (usually higher) rates. Private use of certain company assets (such as ships and potential tax captured by the potential rental car market) pays off,” explains Dr Raftery.
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This information is of a general nature only and does not constitute professional advice. Before acting, you should seek professional advice in relation to your particular circumstances.