Business Franchise Australia


5 Ways to Reduce Your Small Business Tax Bill in Australia

The end of each financial year indicates more hassle and hefty tax bills for most small business owners. Owning a small business means wearing many hats, and the last thing you want to do is give out more of the money you have worked so hard to earn through your business to the government.

Fortunately, several tax-saving strategies can lower your taxable liability as a small business owner. Here are five ways to reduce your small business tax bill in Australia to help you reach your savings and debt reduction goals faster. 

1.Claim deductions for expenses not paid by the end of the financial year 

You can claim deductions for several expenses, even if they haven’t been paid by the end of the financial year. These expenses include employee salaries, staff bonuses, and repair and maintenance. While exploring this option to reduce your tax bill makes financial sense, you must be careful. The Australian Taxation Office (ATO) might audit your business if your deductions look suspicious to the agency. Consult a tax professional such as Pherrus Financial for the next steps if you receive an audit notice.  

2. Add employee benefits instead of salary raises 

Another best way to reduce taxable liability is to compensate your workers by increasing your contribution to their health insurance expenses rather than offering them the same amount as a salary increment.  You could give everyone a $200 monthly raise, but the employees would have to pay Medicare, FICA, and income taxes. 

As an employer, you would have to pay a share of these taxes as well as federal and state unemployment taxes. Instead of giving your employees $200 more, you can pay more for their medical insurance. This will eliminate the income, FICA, Medicare, and unemployment taxes, saving you and your staff money. 

3. Take tax credits to reduce your business income 

The Australian government uses tax credits to encourage businesses to do things that affect the greater good. For instance, you can take tax credits for hiring workers, implementing eco-friendly initiatives, or giving health coverage to employees. Most are part of the General Business Credit, which is quite broad, so there is a greater chance of qualifying under some of its terms. 

4. Claim a small business tax offset 

You might be eligible to claim a small business tax offset on your tax return if you operate a business as a sole trader, which can lower your tax bill by up to $1,000 a year. When you file your tax return, the ATO will determine your offset based on the information you provide. 

5. Meet ATO deadlines 

When you register with a tax agent, you can lodge tax returns as late as May of the following financial year, provided you are not with the Tax Office. However, for everybody else, all returns must be filed by October 31. Complying with the ATO time limits can help you avoid hefty tax bills and penalties.   


Reducing your tax liability may lead to extra profit you get to keep or reinvest in your business. The good news is that the ATO has offered several opportunities to reduce your tax bill as a small business owner. However, some of these require tax planning, so you may need to work with a tax professional who can identify your unique needs to make the most of the deductions available.