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How to DIY tax planning in your small business

Isentia • Published: April 22, 2025 at 04:39 AM by Natalie Lennon
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Proactive tax planning can save small business owners thousands of dollars and give them a clear picture of their financial position before June 30. 

If you're not quite ready to engage an accountant for tax planning, or you're just curious about what it involves, there are things you can do yourself to get a better handle on your tax position and potentially reduce your tax liability. 

Step 1: Work out your estimated taxable income

Before you can start, you need to know where you stand financially. This means pulling together your numbers:

  • Run your Profit and Loss report from July to March or April depending on when you are reading this in your accounting system (Xero, QuickBooks, MYOB, etc). But, and this is key - make sure it’s reconciled. 
  • Estimate the remaining months of the year based on what you know of your sales pipeline, recurring income, and typical expenses. This doesn’t need to be perfect, just realistic.

Once you’ve got an estimate of your profit, you are ready for the next step.

Step 2: Estimate your average tax rate

If your business is incorporated as a company, the tax rate is a flat 25%. If you are a sole trader, you will need to use an online tool to obtain your effective tax rate. 

Your taxable income will be your business profit plus any other personal income like interest, dividends, net rental property income etc.

The ATO has not yet released its 2025 income tax calculator so we recommend using the moneysmart website. Once you input your income into the calculator, it will give you your total income tax and Medicare Levy, add these together and then divide them by your taxable income to give you your effective tax rate. 

We need to use the effective tax rate as it is the average rate of tax you actually pay across all of your income.

This can be a little confusing as the marginal tax rate provided by the calculator just tells you where you sit in the marginal tax rate schedule. However, we need to use the effective tax rate to calculate your tax savings in tax planning. For every $1 of additional deductions, you can reduce your tax bill by your effective tax rate %.

I explain how the marginal tax rates work in an earlier article which can be found here.

Step 2: Calculate any additional tax deductions

  • Pay employee super before June 30: Normally, the June quarter super is due by July 28, but if you pay it early (by June 30), you can bring that tax deduction into this financial year. 
  • Make extra contributions: Also consider topping up your super (assuming this is in line with your overall wealth strategy). The concessional (tax-deductible) cap is $30,000 for the 2024–25 year. 
  • Write off obsolete or unsellable stock: Any stock that’s damaged, expired, or just collecting dust can be written down or written off entirely. 
  • Write off bad debts: If you’ve been chasing invoices that clearly aren’t going to be paid, write them off before June 30. This allows you to claim a deduction for the income you never received. Just make sure you’ve genuinely tried to recover the debt and have documentation to support this.
  • Buy and install assets under $20,000: Eligible assets under this threshold can be written off in full this financial year under the instant asset write-off rules—if they’re installed and ready for use by June 30. That means no ordering something on June 29 and picking it up in July. 
  • Prepay expenses: Some small businesses can claim a deduction for expenses paid up to 12 months in advance (like rent, insurance, or subscriptions).

Final thoughts

DIY tax planning doesn’t have to be complicated or intimidating. With a few hours set aside in April or May, you can gain visibility over your financial position, reduce your tax bill, and take control of your business finances before EOFY chaos hits.

Of course, if you find yourself feeling overwhelmed or unsure, that’s the perfect time to loop in your accountant. But walking into that meeting with your numbers ready, your stock counted, and your bad debts identified? That’s how you level up from small business owner to savvy business boss.

PS: Don’t leave this until the last week of June. Tax planning is only effective before the year ends. After that, you’re in tax return territory, not planning mode. So grab a coffee, crack open your accounting software, and get stuck in.

Your future self (and your accountant) will thank you.

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