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Tax Planning for Brisbane Small Businesses

Tax planning for a small business in Australia means legally arranging your affairs to minimise what you pay in tax, while meeting all ATO obligations. That covers your business structure, the timing of income and deductions, superannuation contributions, and the concessions you’re entitled to use. The key thing to know: it has to happen before 30 June. Most strategies can’t be applied after the financial year ends.

This guide covers the tax questions Brisbane SME owners ask most often, grouped by topic. Each answer stands on its own, so jump to whatever’s most relevant to where your business is right now.

47%


Top personal marginal rate, including Medicare levy. Every dollar above $180,000 is taxed at this rate for sole traders

25%


Company tax rate for base rate entities with turnover under $50M. This flat rate is why restructuring makes financial sense for many growing SMEs.

$30,000


Annual concessional super cap in 2025–26. At the top marginal rate, each dollar contributed saves up to $14,850 in tax.

$500,000


Lifetime retirement exemption under the small business CGT concessions. One of the most valuable tax benefits available, and one of the most commonly missed at time of sale.

Tax Planning Fundamentals

How can a small business legally reduce its tax in Australia


There are four main ways Australian small businesses can legally reduce their tax:

  1. Business structure. A company pays 25–30% flat rather than up to 47% at personal marginal rates. A discretionary trust lets you distribute income to family members on lower tax rates. Getting the structure right for your income level underpins everything else.
  2. Timing income and deductions. Bringing forward deductible expenses before 30 June, or deferring income until after 30 June, shifts taxable income between years. This works best when your income is fairly consistent from year to year.
  3. Superannuation contributions. Concessional (pre-tax) super contributions up to $30,000 per person in 2025–26 are deductible and taxed at only 15% inside the fund. At the top marginal rate, the difference is significant.
  4. Asset write-offs and depreciation. Instant asset write-off lets eligible businesses deduct the full cost of qualifying assets (of up to $20,000) in the year of purchase, rather than depreciating over time. Thresholds and eligibility conditions change regularly, so always check with your accountant before making a major purchase based on this rule.

Worth repeating: effective tax planning requires action before 30 June. Most strategies can’t be applied after the year ends.

What is the difference between tax planning and tax avoidance?

Tax planning means arranging your affairs within the law to minimise what you pay. That includes choosing the right structure, timing income and deductions, and using the concessions you’re entitled to. It’s legal, the ATO has no issue with it, and every well-advised business does it.

Tax avoidance means arranging transactions artificially to reduce tax in a way the law was never intended to allow. The ATO’s General Anti-Avoidance Provisions (Part IVA) give the Commissioner broad powers to cancel the tax benefit of any scheme that has no genuine commercial purpose beyond getting a tax advantage.

A useful practical test: does the arrangement make commercial sense if you ignore the tax benefit? If yes, it’s almost certainly planning. If the only reason to do it is the tax outcome, it’s likely avoidance.

How far in advance should I start tax planning?

The most useful tax planning happens in April and May, while there’s still time to act. A good accountant will bring this up with you before you have to ask.

Some of the most impactful decisions happen throughout the year though, particularly around business structure, super strategies, and asset timing. A restructure done in August is worth more than the same restructure done in a rush in June.

At minimum, schedule a pre-year-end review with your accountant before 15 June each year. The two weeks before EOFY are too late for most strategies.

Business Structure and Tax

What is the most tax-effective business structure for a small business in Australia?

There’s no single right answer. The best structure depends on your income, assets, risk profile, and family situation. As a general guide:

Sole trader: The simplest option, but you’re taxed at personal marginal rates (up to 47%). Works well when income is below $80,000–$100,000 and liability risk is low.

Company (Pty Ltd): Flat tax rate of 25% (base rate entities) or 30%. The gap between this and the top personal rate becomes very significant as profits grow. Generally the right call for businesses clearing over $100,000–$120,000 in profit, particularly those with employees or meaningful liability risk.

Discretionary trust: Distributes income to beneficiaries at their own tax rates, which makes it a strong option for income splitting. Well suited to established business owners with a spouse or adult children on lower incomes, or those with significant assets to protect.
Many established business owners end up with a combination, such as a company acting as trustee of a discretionary trust, or a trading company owned by a trust. These structures can offer both liability protection and income-splitting flexibility, but they need specialist advice to set up properly.

If I move from sole trader to a company, do I save tax immediately?

Not necessarily. It depends on what you do with the profit. If you keep profit inside the company, you benefit from the lower 25–30% rate rather than your personal marginal rate. But that profit is taxed again when it comes out as a dividend.

If you need to draw all the profit out as salary or dividends to cover your living costs, the total tax paid ends up similar to what you’d pay as a sole trader. You still pay personal marginal rates on what you extract.

The real savings come from combining a few things: retaining profit in the company at 25%, using franked dividends to manage the timing of distributions, and potentially running a family trust alongside the company. Get your accountant to model this for your specific situation before assuming a company switch will save you money.

What is a corporate trustee and why would I use one?

A corporate trustee is a company that acts as the trustee of a trust, rather than a person. Most accountants recommend going this route for three reasons:

  • Asset protection: If an individual trustee is personally sued, trust assets can be exposed. With a corporate trustee, the company’s assets are limited to the trust assets. The director’s personal assets aren’t on the table.
  • Continuity: If an individual trustee dies or becomes incapacitated, the trust can be frozen until a replacement is appointed. A company keeps operating, and changing directors doesn’t affect the trust.
  • Succession: Transferring control of a trust is far simpler when it’s done through share transfers in the corporate trustee, rather than formal deed amendments.

The corporate trustee shouldn’t hold any business assets itself. It exists purely to act as trustee. Setup typically costs $800–$1,500 on top of the trust deed.

Deductions, Write-offs, and Timing

What can a small business owner claim as a tax deduction in Australia?

As a general rule, any expense incurred in earning assessable income that isn’t capital in nature is deductible. Common deductions for Brisbane SMEs include:

  • Business operating costs: rent, utilities, phone and internet (business proportion), subscriptions, software, insurance, marketing, accounting fees, bank charges.
  • Staff costs: wages, super contributions, workers compensation insurance, training and upskilling costs.
  • Vehicle expenses: fuel, servicing, registration, insurance, and depreciation, for the business-use proportion. Keep a logbook.
  • Home office: if you genuinely use a dedicated space to run your business, a proportion of rent or mortgage interest, electricity, and internet is deductible. The ATO’s fixed rate method is simpler to apply. The actual cost method takes more record-keeping but can produce a larger deduction.
  • Equipment and tools: generally deductible via depreciation or potentially instant asset write-off for eligible assets.
  • Interest on business loans: interest on funds borrowed for business purposes is deductible. Interest on personal borrowings is not. Keep those accounts separate.

What is instant asset write-off and how does my small business use it?

Instant asset write-off (IAWO) lets eligible small businesses deduct the full cost of a qualifying depreciable asset in the year it’s first used or installed, rather than writing it off gradually over several years.

For 2025–26, the threshold is $20,000 per asset for businesses with aggregated turnover under $10 million. Assets at or above $20,000 go into the small business depreciation pool instead.

Important caveats: The asset must be used, or installed ready for use, by 30 June of the relevant year. The threshold and eligibility conditions have changed multiple times and are subject to legislative extensions. Always confirm the current rules with your accountant before basing a purchase decision on IAWO timing.

For assets that don’t qualify for immediate write-off, the small business pooling rules let you pool most depreciable assets and write them off at 15% in the first year and 30% in subsequent years.

Should I prepay expenses before 30 June to bring forward deductions?

Prepaying deductible expenses before 30 June shifts those deductions into the current financial year. Small business entities can generally deduct prepaid expenses in full, as long as the prepayment period doesn’t exceed 12 months.

Common examples include renewing business insurance before 30 June, prepaying rent under a commercial lease, paying professional memberships and subscriptions a year in advance, and prepaying interest on business loans (conditions apply).

Whether it’s worth doing depends on your expected income this year versus next. If you’re expecting significantly higher income this year, bringing deductions forward makes sense. If income is likely to be similar or higher next year, the timing matters less.

Get your accountant’s recommendation based on your projected income. Generic prepayment advice that doesn’t account for your specific position can backfire.

Can I claim a home office deduction if I run a business from home?

Yes, if you genuinely use a dedicated area of your home for income-producing activities. There are two ATO-approved methods:

  • Fixed rate method: $0.70 per hour worked from home in 2025–26. Covers electricity, internet, phone, and stationery. You don’t need a dedicated room, just a record of the hours. Simple to apply but may understate your actual costs.
  • Actual cost method: You work out the actual proportion of home running costs that relate to the business area. Requires a dedicated work area and solid record-keeping. More involved to calculate, but often produces a larger deduction.

One thing to be aware of: if you own your home, claiming under the actual cost method may reduce your CGT main residence exemption on the portion used for business when you sell. Talk through the long-term implications with your accountant before committing to this method.

Superannuation and Tax

How can business owners use superannuation to reduce tax?

Super is one of the most effective tax planning tools available to Australian business owners. Concessional (pre-tax) contributions are taxed at 15% inside the fund, compared to up to 47% at the top marginal rate.

For a business owner on the top marginal rate, a $25,000 concessional contribution saves around $8,000 in tax compared to taking that amount as income.

How it works: A sole trader or company can make concessional contributions on behalf of the owner-operator as a deductible business expense. The 2024–25 cap is $30,000. Anything above the cap is included in assessable income at the individual’s marginal rate.

Contributions must be received by the fund before 30 June to count in that financial year. Leaving it to the last week of June creates processing risk. Aim to get them in by the third week of June at the latest.

What are catch-up superannuation contributions and who can use them?

If your total superannuation balance was below $500,000 at 30 June of the prior financial year, you can carry forward unused concessional cap amounts from the previous five years and contribute them in a single year. This is the carry-forward or catch-up contribution rule.

If you haven’t been maximising super in prior years, perhaps because cashflow was tight or it wasn’t a priority, this gives you the chance to make a much larger concessional contribution in a high-income year. You reduce taxable income significantly and accelerate your retirement savings at the same time.

Example: If you used only $12,000 of your $27,500 cap in 2022–23, the unused $15,500 can be carried forward. In a later high-income year, you could contribute up to the standard cap plus those carried-forward amounts, potentially $60,000 or more in a single year.

Check your super balance and unused cap amounts through ATO online services or with your accountant before acting on this.

Capital Gains Tax for Small Business

What is the small business CGT concession?

The small business CGT concessions are four separate provisions that can reduce or eliminate capital gains tax when you sell a business asset, including the business itself. They’re among the most valuable tax benefits available to Australian small business owners, and they’re also among the most commonly missed.

The four concessions:

  • 15-year exemption: If you’ve owned a business asset continuously for 15 or more years, are 55 or older, and are retiring or permanently incapacitated, the entire capital gain is exempt. There’s no cap on the gain.
  • 50% active asset reduction: Reduces the capital gain by 50% where the asset qualifies as an active asset (used in the business). Can be stacked with the general 50% CGT discount for individuals, taking the total reduction to 75%.
  • Retirement exemption: Exempts up to $500,000 lifetime of capital gains. If you’re under 55, the exempt amount must be contributed to super.
  • Rollover concession: Defers a capital gain for up to two years if you plan to acquire a replacement asset or make improvements to an existing one.

To be eligible, you need to meet the basic conditions: either the $10 million aggregated turnover test or the $6 million maximum net asset value test. Get specialist advice well before any planned sale. These concessions require preparation to access correctly.

Do I pay CGT when I sell my business in Australia?

It depends on your structure, the size of the gain, and whether you qualify for the small business CGT concessions.

If you sell business assets including goodwill, and the business is small enough to meet the eligibility thresholds, you may be able to significantly reduce or eliminate CGT through one or more of the small business CGT concessions. In the best case, where you qualify for the 15-year exemption, no CGT is payable at all.

If you don’t qualify for the concessions, individuals and trusts can still access the general 50% CGT discount for assets held longer than 12 months. Companies can’t access that discount.

Tax on a business sale is one of the most consequential financial events you’ll face as a business owner. Specialist advice is needed ideally 12 to 24 months before the planned sale date, not in the week before settlement.

Common Compliance Traps and ATO Risks

What is Division 7A and how does it affect my company?

Division 7A of the Income Tax Assessment Act 1936 treats certain transactions between a private company and its shareholders, or their associates, as unfranked dividends. That means they’re taxable at the shareholder’s marginal rate with no franking credit to offset it.

The most common triggers are: using company funds to pay personal expenses, drawing money from the company account without a formal salary, dividend, or complying loan arrangement, and writing off a loan the company made to a shareholder.

The complying loan agreement: A loan from a company to a shareholder can avoid Division 7A if it’s documented in a complying loan agreement at the ATO benchmark interest rate, with minimum annual repayments. Missing minimum repayments in any year triggers a deemed unfranked dividend for that year’s shortfall.

Division 7A is one of the ATO’s most active compliance focus areas for private companies. If your business draws money informally, talk to your accountant about whether a complying arrangement is in place.

What are the ATO's most common audit triggers for small businesses?

The ATO uses data matching, industry benchmarks, and targeted compliance programs to identify returns worth a closer look. Common triggers include:

  • Results significantly outside industry benchmarks: The ATO publishes benchmarks for hundreds of industries. If your gross profit margin or expense ratios sit well outside the typical range for your industry, your return is more likely to be reviewed.
  • High cash income with low reported profit: Cash-intensive businesses in hospitality, construction, and retail are a persistent focus. The ATO cross-references reported income against lifestyle indicators, bank deposits, and third-party data.
  • Consistently reporting losses: A business that consistently reports losses raises questions about whether it’s genuinely commercial. Non-commercial loss rules restrict the ability to offset hobby or lifestyle losses against other income.
  • Misclassifying employees as contractors: This is one of the ATO’s highest-priority compliance areas. The tests for contractor versus employee status are based on the whole arrangement, not just what the contract says.
  • Unusual deductions: Large or unusual deductions for travel, entertainment, home office, and vehicles, relative to industry peers, are a known flag.

What are the key tax deadlines for small businesses in Australia?

The key dates every Brisbane SME should have on the radar:

  • 28 July: Q4 superannuation guarantee due (April–June quarter). Quarterly PAYG withholding is also due for small withholders.
  • 28 August: Taxable Payments Annual Report (TPAR) due for businesses in building and construction, cleaning, IT, courier, and security.
  • 28 October: Q1 BAS due (July–September) and Q1 super. Individual and most business tax returns are also due if you’re self-lodging without a tax agent.
  • 28 February: Q2 BAS due (October–December). Q2 super falls earlier, on 28 January.
  • 28 April: Q3 BAS and super due (January–March).
  • 15 May: Extended lodgement deadline for tax agents. Most business tax returns lodged through a registered agent qualify for this.
  • 30 June: End of financial year. Last day for super contributions to count in the current year, asset purchases for instant asset write-off, and most year-end tax planning actions.

If a deadline falls on a weekend or public holiday, it generally moves to the next business day. Lodging through a registered tax agent gives you extended deadlines on most returns.

My accountant only contacts me at tax time. Is that normal?

For many small businesses, particularly sole traders and simple companies, one contact a year at tax time is the norm. It covers the basics: lodging returns, meeting compliance obligations, and keeping the ATO happy.

What it doesn’t cover is proactive tax planning, cashflow forecasting, structure reviews as your income grows, or advice before major decisions like buying equipment, taking on a business partner, or selling an asset. It also doesn’t give you the ongoing insight that helps you make better decisions throughout the year.

A business turning over $300,000 to $500,000 or more, or one that’s growing quickly, taking on debt, or building assets, typically benefits from quarterly contact with their accountant. The value in that relationship isn’t found at tax time. It’s found in the decisions made throughout the year that make tax time easier and less costly.

Quick Pre-30 June Tax Planning Checklist

Review these with your accountant before the end of each financial year.

  • Review your business structure. Is it still right for your current income level and risk profile? A restructure done now is worth more than the same one done in July.
  • Model your expected taxable income. Estimate profit before 30 June so there’s still time to act on the result.
  • Maximise concessional super contributions. Aim for the $30,000 cap. If your super balance is under $500,000, check whether catch-up contributions are an option.
  • Review asset purchases. Is there equipment you’ll need in the next 12 months? Buying before 30 June may allow instant asset write-off in the current year.
  • Prepay deductible expenses. Business insurance, rent, subscriptions. If the benefit period is 12 months or less, the deduction is available this year.
  • Check Division 7A compliance. Are there loans or informal payments from your company? Make sure complying loan agreements are documented and minimum repayments are made.
  • Review trust distributions. If you operate through a discretionary trust, the trustee must make a valid distribution resolution before 30 June. This can’t be backdated.
  • Check superannuation is up to date. Unpaid super is not deductible. All employer super contributions need to be paid and received by the fund before 30 June.
  • Review outstanding debtors. Bad debts must be formally written off before 30 June to claim the deduction in the current year.
  • Book your pre-year-end review. Aim for late May. Everything on this list is far easier to act on with three weeks to spare than three days.
Picture of Simon Burke, CA

Simon Burke, CA

Simon Burke is a Chartered Accountant (CAANZ), Registered Tax Agent and Co-Founder of Acctivate Business Accountants, with a decade of experience in accounting and business advisory. Holding dual degrees in Business Management and Commerce and a Xero Advisor certification, Simon specialises in helping businesses build stronger foundations through smarter structures, cash flow strategy, and operational efficiency.

Frequently asked questions

Common questions from Brisbane business owners about tax planning. 

How can a Brisbane small business legally reduce its tax bill?

There are four main levers Queensland small businesses use to legally reduce tax; none of them are overly complicated.  The foundation is business structure. A company taxed at a flat 25% rate (for base rate entities) pays significantly less than a sole trader on the top personal marginal rate of 47%, including the Medicare levy. If you are generating more than $100,000 to $120,000 in profit, the gap becomes substantial.

The second lever is timing. Bringing deductible expenses forward before 30 June, or deferring invoicing until after 30 June, shifts taxable income between financial years. This works best when your income is fairly predictable. Prepaying insurance, rent, or subscriptions before EOFY are common examples.

Third is superannuation.  Inside the super fund, contributions are taxed at 15%, rather than your marginal rate of up to 47%.  The 2025–26 cap set at $30,000 annually per individual.  A business owner on the top marginal rate contributing $25,000 saves around $8,000 in tax compared to taking that as income. Remember, contributions must be received by the super fund before 30 June to count toward that financial year.

Last is the instant asset write-off (IAWO). Eligible Small businesses can now deduct the entire cost of assets less than $20k rather than depreciating them over a number of years. Always check with your accountant to confirm the threshold BEFORE purchasing an asset to see whether it qualifies for IAWO, as the rules change regularly.

The most important thing to understand all of these strategies require action before 30 June. Decisions made after the financial year ends generally cannot be reversed.

Essentially, the tax advantage comes down to the rate you pay on profit.  A sole trader will pay personal income tax at marginal rates. That rate currently tops out at 47% (the Medicare levy factored in) for earnings above $180,000. Tax is applied on every dollar of business profit at the owner’s personal rate. For a base rate entity company (aggregated turnover less than $50 million) you pay just 25% tax, no matter how much profit you make.

On the surface, that sounds like a big gap, but there’s a catch. If you take all the company’s profit out as salary to live on, you still pay personal marginal rates on what you extract. The 25% rate applies only to profit retained within the company. That deferred profit is taxed again when it is eventually distributed as a dividend.  Where the real tax savings occur is when you can leave profit inside the company to reinvest in the business, build cash reserves or utilise a family trust structure, which allows you to distribute income to beneficiaries at lower tax rates.

As a rule of thumb, if your business is generating less than $80,000–$100,000 in profit and liability risk is low, a sole trader structure is often sufficient. Once you’re regularly making more than $100k-$120k profit, or have employees/business risk, a company will likely be more tax effective and give you far better protection from lawsuits. Get your accountant to model the numbers as they apply to your situation. 

It makes good business sense to explore tax-efficient superannuation strategies, as contributions made into super receive a significant tax discount, as they are taxed at 15% inside the fund rather than marginal personal tax rates of up to 47%.  That difference compounds significantly over time.  

For a business owner on the top marginal rate, a $25,000 concessional contribution saves around $8,000 in tax compared to taking that same amount as personal income. At the $30,000 cap, the savings are approximately $9,600.

Concessional contributions include employer superannuation guarantee payments, salary sacrifice arrangements, and personal contributions for which a deduction is claimed. A sole trader or company can make concessional contributions on behalf of the owner-operator as a deductible business expense.

Contributions must be received by the super fund before 30 June to count as a deduction in that financial year. Leaving it to the last week of June creates processing risk, so aim for the third week of June at the latest.  

If your total super balance was below $500,000 on 30 June of the prior financial year, you can carry forward unused concessional cap amounts from the previous five years under the catch-up contribution rules. This is a powerful option for business owners in a high-income year who have not maximised super contributions in prior years, as they can make a much larger single contribution and significantly reduce taxable income.  Check your unused cap amounts through ATO online services or with your accountant before acting on this strategy.

The small business CGT concessions are among the most valuable tax benefits available to Australian small business owners – and among the most commonly missed at the time of sale. There are four separate concessions, each with its own conditions, and they can be combined.

The 15-year exemption is the most powerful. If you have owned a business asset continuously for 15 or more years, are aged 55 or older, and are retiring or permanently incapacitated, the entire capital gain is exempt. There is no cap on the size of the gain.

The 50% active asset reduction applies where the asset qualifies as an active asset – one used in carrying on the business. It reduces the capital gain by 50%. For individuals and trusts, this can be stacked with the general 50% CGT discount that applies to assets held longer than 12 months, taking the total reduction to 75%.

The retirement exemption allows up to $500,000 lifetime of capital gains to be exempt. If you are under 55, the exempt amount must be contributed to superannuation. If you are 55 or older, it does not.

The rollover concession defers a capital gain for up to two years if you plan to acquire a replacement active asset or make capital improvements to an existing one.

To access any of these concessions, you must first meet the basic eligibility conditions: either the $10 million aggregated turnover test or the $6 million maximum net asset value test. These concessions require careful planning well before any sale. Leaving it until the week before settlement makes many of them impossible to access correctly. Start conversations with a specialist 12 to 24 months before a planned sale.

Division 7A is one of the ATO’s most active compliance focus areas for private companies in Australia, and it catches business owners out more often than most other provisions.

The rule sits in the Income Tax Assessment Act 1936 and is designed to prevent private company profits from being distributed to shareholders tax-free. When it applies, the amount is treated as an unfranked dividend; taxable at the shareholder’s marginal rate with no franking credit to offset the tax. This is often a worse outcome than if the money had simply been taken as a salary.

The most common triggers are using company funds to pay personal expenses (school fees, personal credit card, home improvements); drawing money from the company account without it being formally documented as a salary, dividend, or complying loan; and writing off a loan the company made to a shareholder.

The standard mechanism to keep a loan from triggering Division 7A is a complying loan agreement. The loan must be documented in writing, charged interest at the ATO’s benchmark interest rate (set annually), and have minimum repayments made each year. If minimum repayments are missed in any year, the shortfall is treated as a deemed unfranked dividend for that year.

If your business draws money informally, even small amounts here and there, so make sure you speak to your accountant before the end of the financial year. Division 7A issues are far easier to address before 30 June than after, and the ATO’s data-matching capability means informal withdrawals rarely go undetected.

Tax planning is not a 30 June activity. By the time most business owners start thinking about it, many of the most effective strategies are off the table.

The most useful windows are April and May. At that point, you can estimate your full-year profit, identify which strategies apply, and still have time to act, whether that is making super contributions, prepaying deductible expenses, reviewing trust distributions, or purchasing equipment under the instant asset write-off. A good accountant will initiate this conversation with you proactively rather than waiting to be asked.

Schedule a pre-year-end review with your accountant by 15 June each year at the latest. The two weeks immediately before 30 June are genuinely too late for most strategies. Super contributions need processing time; aim for the third week of June. Trust distribution resolutions must be made before 30 June and cannot be backdated. Debt write-offs, asset purchases, and prepayments all require a few weeks of runway.

That said, some of the highest-impact decisions are made entirely outside the EOFY window.  Business structure reviews, whether to move from sole trader to a company, or to set up a trust, are best done in July or August for the new financial year, not in a rush in June. The same applies to superannuation strategy for catch-up contributions, which require you to know your balance on 30 June of the prior year before acting.

The business owners who pay the least tax over time are not the ones who scramble in late June. They are the ones who have a quarterly conversation with their accountant throughout the year and make decisions at the right time, rather than the closest possible time.

The ATO does not randomly select businesses for audit.  It uses sophisticated data matching, publicly available industry benchmarks, and targeted compliance programs to identify returns that warrant closer attention. Understanding the common triggers is straightforward risk management.

Profit margins or expense ratios outside industry benchmarks are the most systematic trigger. The ATO publishes benchmark ranges for hundreds of industries. If your gross profit margin sits well outside the typical range for your business type, your return is more likely to be flagged for review. Your accountant should know where your numbers land relative to these benchmarks.

High cash income with low reported profit is a persistent focus area, particularly in construction, hospitality, and retail. The ATO cross-references reported income against bank deposits, merchant facility data, lifestyle indicators, and third-party reporting. Cash-intensive businesses face a higher baseline level of scrutiny.

Consistently reporting business losses raises questions about whether the activity is genuinely commercial. Non-commercial loss rules restrict the ability to offset hobby or lifestyle losses against other income. A business that loses money year after year, yet the owner maintains an affluent lifestyle, is a pattern the ATO recognises.

Misclassifying employees as contractors is one of the highest-priority compliance areas at present. The test for contractor versus employee status is based on the totality of the working arrangement: control, tools, financial risk, and ability to subcontract – not just the wording of the contract. The ATO has access to Single Touch Payroll data and contractor payment reports that make this easier to detect.

Large deductions for travel, entertainment, home office, and vehicles relative to peers are a known flag. Keep clear records, including vehicle logbooks, receipts and business-purpose notes for entertainment, and a diary or time-tracking record for home-office hours. Good records are the simplest defence against any audit.

Talk to Acctivate about your tax position

Acctivate are CA-qualified accountants in Brisbane, specialising in tax planning, business structuring, and advisory for SMEs. We work with business owners throughout the year, not just at tax time, to build strategies that reduce tax legally and support long-term growth.

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