Business tax planning means arranging your affairs before year end to legally minimise tax, through the right structure, timing of income and expenses, super contributions and available concessions. Done proactively through the year rather than at tax time, it is one of the highest-return activities a business owner can undertake.

Most business owners pay more tax than they need to — not because of anything illegal, but because no one planned ahead. Business tax planning is the process of legally structuring your decisions throughout the year to keep more of what you earn and reduce what you hand to the ATO.

In this guide, we cover the essential strategies every Australian business owner should be implementing now — from maximising deductions and timing capital gains to structuring your business for long-term tax efficiency. Whether you run a sole trader, company, or family trust, there are opportunities here worth tens of thousands of dollars each year.

What Is Business Tax Planning?

Business tax planning is the proactive process of legally structuring your income, expenses, and business activities to minimise your tax liability. Unlike tax compliance — which records what has already happened — tax planning is about making better decisions before they happen.

Done well, it can save a business owner tens of thousands of dollars each year. Done poorly — or not at all — the ATO takes a significantly larger share of your profits than it needs to. Effective planning covers:

• Choosing the right business structure (company, family trust, sole trader, or a combination)
• Timing when income is earned and when expenses are paid
• Maximising legitimate deductions before 30 June
• Managing capital gains events strategically
• Optimising superannuation contributions
• Distributing income efficiently across your group

Without proactive planning, business decisions get made without considering their tax consequences. By the time June arrives, those opportunities have passed — and you’re left paying more than you needed to. Use our business tax calculators to model different planning scenarios.

What’s Changed for Business Tax Planning in 2026?

Several important changes affect how Australian business owners should approach tax planning in 2026. Understanding these now — rather than at EOFY — is where the real savings happen.

Payday Super Starts 1 July 2026

From 1 July 2026, employers must pay superannuation at the same time as wages — ending the quarterly super payment cycle. This is the most significant payroll change in years. For businesses managing cash flow month to month, this requires immediate planning. Late or missed payday super payments will attract ATO penalties, and the ATO has indicated it will enforce compliance actively from day one. If your payroll system isn’t ready, act now.

Super Guarantee Rate Is Now 12%

The super guarantee rate increased to 12% from 1 July 2025. For a business with $500,000 in wages, that’s $60,000 in annual super obligations. Review your wage costs, update payroll budgets, and factor this into any pricing or salary reviews for 2026–27.

$20,000 Instant Asset Write-Off Is Now Permanent

The $20,000 instant asset write-off has been legislated as permanent for businesses with turnover under $10 million. After years of the threshold changing annually, you can now plan asset purchases with certainty. Equipment, tools, vehicles, or any eligible asset under $20,000 can be claimed in full in the year of purchase.

ATO Compliance Focus Areas for 2026

The ATO has signalled increased scrutiny across several areas this year. If any of these apply to your business, ensure your records are in order:

• Work from home deductions — the 67 cents per hour method remains available but requires contemporaneous records. The ATO is actively reviewing lump-sum claims.
• Rental property expenses — particular focus on interest deductions, repairs versus capital improvements, and holiday home claims
• Personal service income (PSI) — contractors who earn primarily from their personal skills may have income attributed back to them personally, regardless of entity structure — read our personal services income guide to understand when the rules apply
• Division 7A compliance — undocumented or under-managed loans from companies to shareholders remain a high-priority audit area

Maximising Tax Deductions with Instant Asset Write-Off and Pre-Paying Expenses

One of the most effective strategies in business tax planning is taking full advantage of the Instant Asset Write-Off. This incentive allows eligible businesses to claim immediate deductions for assets purchased and used in the business, up to $20,000 per asset. Whether it’s equipment, machinery, or vehicles under the threshold, the instant write-off can significantly reduce your taxable income in the current financial year.

Motor Vehicle Costs and the Instant Asset Write-Off

Motor vehicle expenses are often one of the largest costs for business owners. Under the Instant Asset Write-Off, eligible vehicle costs are immediately deductible — but cost limits for motor vehicles apply, and only the business-use portion is claimable. Keeping a detailed motor vehicle logbook is essential if you’re claiming based on business use percentage.

For a detailed breakdown, see our guide: How to Claim Motor Vehicle Expenses on Tax in Australia (2026 Guide).

Pre-Paying Expenses to Reduce Taxable Income

Another key business tax planning strategy is pre-paying certain business expenses before 30 June. Pre-paying items like insurance premiums, software subscriptions, and rent can bring forward deductions into the current financial year and reduce your taxable income now. Eligible expenses must relate to a period not exceeding 12 months beyond the payment date.

By combining the instant asset write-off with strategic pre-payments, you can make substantial progress in reducing your tax liability while keeping your business well-equipped for the year ahead.

Capital Gains Tax (CGT): Timing and Small Business CGT Concessions

Timing is critical in business tax planning — particularly when it comes to Capital Gains Tax (CGT). Selling business assets such as property, shares, or goodwill has significant tax implications. By strategically timing asset sales and using available CGT concessions, small business owners can substantially reduce their overall tax liability.

Timing Capital Gains to Minimise Tax Liability

The timing of when you realise a capital gain matters. If you expect lower income in the next financial year, deferring the sale of an asset until after 30 June may lower your current tax liability by pushing the CGT obligation into a year when your total income — and therefore your marginal rate — is less.

Small Business CGT Concessions

Australia provides several CGT concessions specifically for small businesses to help reduce the tax on asset sales:

• The 15-year exemption: If you’ve owned a business asset for more than 15 years and are aged 55 or older, you may be eligible to sell the asset without paying CGT.
• The retirement exemption: You can reduce your capital gains by up to $500,000 if you’re retiring and meet specific conditions. This limit applies per individual, making it particularly valuable for business partners or co-owners.
• The rollover concession: If you sell an asset and reinvest the proceeds in a replacement asset, you may be able to defer your CGT liability until you sell the replacement asset.
• The Active Asset Reduction: If the asset qualifies as an active asset used in your business, you may qualify for a 50% reduction on the capital gain, with a maximum reduction of $500,000 per individual.

By carefully timing asset sales and strategically applying these CGT concessions, you can significantly reduce the tax payable on business asset sales — freeing up more capital for reinvestment. For a detailed breakdown of how the 50% discount applies, see our guide to the CGT discount and 50% rule for Australian business owners.

Optimising Business Structures: Tax Savings and Asset Protection

One of the most important decisions in business tax planning is choosing the right structure. The structure you use affects how much tax you pay, your personal liability, and your ability to grow and protect wealth over time.

Choosing the Right Business Structure

The most common business structures in Australia each carry different tax implications:

• Sole Trader: Simple to set up, but profits are taxed at individual marginal rates — which can be high if the business is profitable. No asset protection.
• Partnership: Income is split between partners and taxed at individual rates. All partners carry personal liability for business debts.
• Company: A separate legal entity taxed at the 25% small business corporate rate (for businesses under $50M turnover). Provides personal liability protection and flexibility for reinvestment and franked dividends.
• Trust: Allows income to be distributed to beneficiaries in lower tax brackets, providing significant tax savings across the family group. Setup and administration are more complex, but the long-term benefits frequently justify it for businesses above a certain profit level.

Private Company Loans (“Div 7A”)

Business owners who have borrowed funds from their company must understand Division 7A rules. These rules govern loans from private companies to shareholders or their associates — including directors. Poorly managed Div 7A loans can create unexpected and significant personal tax liabilities.

• Loans to Directors: A loan made directly to a director must either be repaid by 30 June or have a complying loan agreement in place before the company’s tax return is lodged. The agreement must meet ATO guidelines, including a minimum benchmark interest rate and a set repayment schedule. If these conditions are not met, the loan is treated as an unfranked dividend — taxable to the director personally at their marginal rate.
• Loans Between a Family Trust and a Corporate Beneficiary: Where a family trust has loaned funds to a corporate beneficiary, the loan must be repaid or a complying agreement established before the company’s tax return lodgement date. The same ATO requirements apply.

Trustee Resolutions for Family Trusts

If your business operates through a Discretionary (Family) Trust, trustee resolutions must be prepared and signed before 30 June each year. These resolutions formally allocate trust income to specific beneficiaries for the financial year. Failing to have them in place by the deadline results in the trust’s taxable income being assessed at the highest marginal rate — up to 47%. Given recent ATO rulings on trust distributions to adult children, it’s essential to work with your accountant well before year-end. For more detail, see our guide: Trust Distribution Minutes 2026: What Trustees Must Do Before 30 June.

Maximising Superannuation Contributions, Depreciation, and Franking Credits

Smart business tax planning involves more than managing income and expenses — it also includes forward-thinking strategies like boosting superannuation contributions, claiming depreciation, and using franking credits effectively. These tactics reduce taxable income and improve long-term financial outcomes for both the business and its owners.

Maximising Superannuation Contributions

Contributing to superannuation is one of the most tax-effective tools available to business owners. For the 2025–26 financial year, the concessional contributions cap is $30,000. Concessional contributions — including employer contributions and salary sacrifice amounts — are taxed at 15% within the fund, which is lower than most individual marginal tax rates.

For business owners with a strong profit year, the carry-forward rule provides an additional opportunity. If your total superannuation balance was under $500,000 on 30 June of the prior year, and you haven’t used the full concessional cap in any of the last five financial years (from 2018–19), you can carry forward unused cap amounts and make larger deductible contributions in a high-earning year. All contributions must be received by your super fund before 30 June to count for that financial year. For a full breakdown of super contribution strategies for business owners — including catch-up contributions and personal deductible contributions — see our guide to superannuation strategies for business owners.

Claiming Property Depreciation

If your business owns or operates from a commercial or income-producing property, you may be entitled to claim depreciation deductions. These typically fall into two categories:

• Capital works deductions — for the building structure, renovations, and structural improvements
• Plant and equipment depreciation — for items like carpets, air conditioning units, and furniture

To claim the maximum allowable deductions, investing in a tax depreciation schedule from a qualified quantity surveyor is often worthwhile — the additional deductions claimed frequently exceed the cost of the report.

Utilising Franking Credits

If your business operates through a company structure, issuing dividends with franking credits is a strategic way to distribute profits to shareholders while reducing overall tax liability. Franking credits represent tax already paid at the company level and can be used by shareholders to offset their personal tax when lodging individual returns.

When planning dividend payments, consider:

• The available franking credits in the company’s franking account
• The timing of dividend declarations to ensure credits are applied efficiently
• The broader group structure — particularly where a bucket company or corporate beneficiary is involved

A bucket company can serve dual purposes: it caps the tax rate on trust distributions at the corporate rate (25–30%) and provides asset protection by separating retained profits from the trading entity. However, all franking credit arrangements must comply with tax law — the ATO scrutinises arrangements where credits are moved without a genuine commercial purpose.

Also be aware of Franking Deficit Tax (FDT): if your company declares more franking credits than it holds in its franking account — often due to poor timing of prior tax payments — it will be liable for the shortfall. Track your franking account balance carefully before declaring dividends. If you want peace of mind that your business is ATO-compliant, see our guide on ATO Audit Support for Businesses.

Conclusion: Prepare Early, Plan Smart

Effective business tax planning isn’t just about reducing your tax bill — it’s about making smart, forward-thinking decisions that support your business’s growth and financial security. From the instant asset write-off and pre-paying expenses to managing Division 7A loans, maximising super contributions, and choosing the right structure, every decision made now has a meaningful impact on your bottom line.

At Pinnacle Accounting & Advisory, we specialise in working with Melbourne business owners to develop tailored tax planning strategies that go well beyond the basics. We help you review your current structure, identify savings opportunities, and ensure full ATO compliance — before problems arise, not after.

📞 Ready to stop overpaying? Contact us today to book your business tax planning review.

Frequently Asked Questions

What is business tax planning?

Business tax planning is the process of legally structuring your business activities, income, and expenses to minimise your tax liability. It involves proactive decisions — about your business structure, deductions, superannuation, and asset sales — made before they happen, not after. The goal is to ensure the ATO takes only what it’s entitled to, and no more.

When should I start business tax planning?

Ideally, tax planning is a year-round activity — not something you think about in May or June. The best time to start is at the beginning of the financial year (July), so you have the full 12 months to implement strategies. That said, even mid-year planning can deliver significant savings. If you haven’t started yet, the best time is now.

How can I legally reduce my business tax in Australia?

There are many legitimate strategies available: maximising deductible expenses and pre-paying eligible costs before 30 June, claiming the instant asset write-off for purchases under $20,000, increasing superannuation contributions, using the right business structure to access lower tax rates, and strategically timing capital gains events. The right mix depends on your specific situation — a qualified tax advisor will identify the highest-value opportunities for your business.

What is the company tax rate in Australia for 2026?

For the 2025–26 financial year, the base rate entity corporate tax rate is 25% for companies with an aggregated turnover under $50 million (provided they derive 80% or less of their assessable income from passive sources). Companies above this threshold — or those that don’t meet the passive income test — pay the standard 30% corporate tax rate.

What is the instant asset write-off limit for 2026?

The instant asset write-off threshold is $20,000 per asset for businesses with aggregated turnover under $10 million. This has now been made permanent. The asset must be purchased, installed, and ready for use before 30 June to be claimed in that financial year.

How much should I set aside for business tax in Australia?

A general rule of thumb for businesses operating through a company is to set aside 25–30% of net profit for tax. For sole traders or partnerships, the amount depends on your personal income tax bracket — marginal rates can reach 47% (including the Medicare levy). A tax planning review with your accountant will give you a far more accurate figure based on your actual structure and profit level. For a quick starting estimate, try our business tax calculator.

Can I pay less tax by restructuring my business?

Yes — business structure is one of the biggest levers in tax planning. Sole traders pay tax at personal marginal rates (up to 47%), while companies are taxed at 25–30%. Family trusts can distribute income to beneficiaries in lower tax brackets, reducing the overall tax paid across the family group. The right structure also provides asset protection — which has significant long-term value beyond the tax savings alone. If you’re considering moving from a sole trader to a company, our guide to converting from sole trader to company covers the triggers, CGT implications, and key steps. The small business restructure rollover can allow eligible businesses to change structure without triggering CGT at the time of transfer. Restructuring also has stamp duty implications — always seek professional advice before making changes.

Do I need an accountant for business tax planning?

Technically no — but for any business with meaningful revenue, the savings from good tax advice far exceed the cost of the advice. A Chartered Tax Advisor (CTA) or CPA with business advisory experience will identify opportunities you wouldn’t find yourself, keep you compliant with ATO rules, and help you make decisions with their tax consequences already understood. Pinnacle Accounting & Advisory offers a proactive, year-round approach to business tax planning for Melbourne small business owners.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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Discover essential tax deductions for NDIS support workers, a crucial aspect to enhance your financial well-being while helping Australians with disabilities.

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Working as NDIS disability support workers is more than just a job — it’s a vital role that helps improve the lives of Australians living with disabilities. But while you’re busy caring for others, who’s looking after your finances? When tax time rolls around, knowing exactly what you can claim as a deduction could mean the difference between a modest and generous refund.

Whether you’re employed, self-employed, or a sole trader under the NDIS scheme, understanding your entitlements can help you keep more of your hard-earned money. In this guide, we break down the essential tax write-offs NDIS workers often overlook — and how to make sure you’re claiming everything you’re legally entitled to.

Understanding Your Role as a Disability Support Worker

Before you start listing deductions, it’s crucial to understand how your role fits within the tax system. The Australian Taxation Office (ATO) categorises NDIS workers under several employment types — and each can influence what you’re eligible to claim.

✅ Who is an NDIS Worker?

NDIS (National Disability Insurance Scheme) workers include support workers, carers, allied health professionals, plan managers, and even those in admin roles. Whether you’re employed by a provider or operating as an independent contractor, you may be eligible for a range of support worker tax deductions — but the type and amount will depend on how you work.

🧾 Employee vs. Contractor: Know the Difference

If you’re an employee (on payroll with tax withheld), your deductible expenses may be more limited and tied directly to your employment conditions. But if you’re a sole trader or contractor, you can often claim a broader range of business-related expenses — as long as they’re directly tied to earning your income.

Understanding your classification is the first step in confidently claiming what’s yours.

The NDIS provider guidelines clearly define the scope of roles under the scheme, helping you understand where you fit — whether as a sole trader, contractor, or employee.

If you’re working as an independent support worker under the NDIS, you may have different tax obligations than employees

🛠️ Why Tax Deductions Matter

Every dollar you spend out-of-pocket for work-related purposes — from uniforms to fuel — can add up over a year. If those expenses aren’t claimed, you’re essentially leaving money on the table. By getting clear on your role and responsibilities, you’ll be in a stronger position to track your eligible costs and prepare for tax time more efficiently.

💬 Pro Tip:

Keep a work diary (even a simple app log) if you’re unsure which tasks or costs qualify as tax-deductible. This will be your best friend when it comes time to sort receipts or defend a claim during an ATO audit.

Common Tax Deductions for NDIS Support Workers You Can Claim

As an NDIS worker, your job likely involves a mix of physical work, admin, and travel — and each of these areas can come with tax-deductible expenses. Knowing what’s deductible (and what’s not) is key to maximising your return.

Here’s a breakdown of common deductions many NDIS workers can claim:

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👕 1. Work-Related Clothing & Laundry

You can claim:

• Branded uniforms
• Protective clothing (like non-slip shoes or gloves)
• Laundry costs for these items (if you wash them yourself)

Note: You can’t claim for everyday clothing, even if you wear it to work.

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📚 2. Training & Education

Claimable expenses include:

• Short courses or certifications related to your role (e.g., First Aid, Manual Handling)
• Seminars or online training related to disability care or support work

These costs must directly relate to your current job, not a new profession.

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📞 3. Phone & Internet Usage

If you use your personal phone or internet for work (like contacting clients, using NDIS portals, or rostering apps), you can claim a portion of:

• Mobile phone bills
• Internet bills

Keep a usage diary for a month to justify your work-use percentage.

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🧰 4. Supplies, Tools and Equipment

You might be able to claim:

• Assistive tools used in care, such as mobility aids, specialized equipment, or devices purchased specifically for work-related tasks.
• Work-related equipment like laptops, phones, or other tools necessary for providing NDIS support.
• Protective gear required for maintaining safety, such as gloves or face shields, especially when providing hands-on care.

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🧾 5. Expenses for Support Workers Consumables

• Consumables for client care: Items like gloves, sanitizers, and other personal protective equipment (PPE) used to maintain hygiene and safety.
• Office supplies: Items such as pens, paper, printer ink, or diaries used for documenting and organizing client information.
• Cleaning supplies: Cleaning products (like disinfectants) used to sanitise work areas or equipment, especially in healthcare settings.

🚘 6. Travel Between Jobs (More on This in the Next Section)

If you visit multiple clients in a day, you may be eligible to claim those trips. We’ll dig into this in the next section — stay tuned!

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💡 Tip:

Always keep receipts or digital records. The ATO loves documentation — and having it on hand can make or break your claim if audited.

Vehicle and Travel Expenses for Support Workers Explained

If you’re regularly on the road visiting clients, travel could be one of your biggest (and most overlooked) tax deductions. But when it comes to claiming vehicle and travel expenses, the ATO has very specific rules — and getting it right can seriously boost your tax return.

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🚗 When Can You Claim Travel?

You can claim travel between:

• Multiple client homes or job sites during your shift
• Your workplace and training events
• Your office and supply stores (to purchase work-related items)

You cannot claim:

• Travel from home to your first job of the day, or from your last job back home (this is considered “private travel”)

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✍️ Claiming Car Expenses for support workers: Two Main Methods

1. Cents Per Kilometre Method
   • Claim up to 5,000 km per year
   • No need for receipts, but you must be able to show how you calculated the distance
   • Rate for 2025–26: 88 cents per km — see our full guide to ATO motor vehicle expense claims
2. Logbook Method
   • Keep a logbook for 12 weeks showing work vs personal use
   • Claim a percentage of total car expenses (fuel, rego, insurance, servicing, depreciation)
   • Ideal if you use your car heavily for work

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Support Workers Other Travel Expenses

🚌 What About Public Transport or Rideshares?

If you use buses, trains, taxis, or rideshares like Uber to travel between clients or to training, these are deductible — just make sure to keep your receipts or digital records.

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🧾 Travel Diaries & Record Keeping

Keep a digital or written log of:

• Dates
• Start/end locations
• Reason for the trip
• Kilometres travelled (if driving)

A spreadsheet, mileage app, or even a good old notebook can do the trick — as long as it’s consistent and clear.

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💡 Bonus Tip:

Use apps like ATO myDeductions or Stride to automatically track trips. It makes life 10x easier at tax time.

Home Office and Admin Costs

Even if you’re out and about most of the day, many NDIS workers spend time doing admin, planning, or logging case notes from home. If that sounds like you, there are legitimate home office deductions you should be taking advantage of.

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🏠 What Qualifies as a Home Office?

If you perform work-related tasks at home — such as:

• Completing care plans
• Communicating with clients or coordinators
• Writing up reports or case notes
• Organising appointments or schedules

— then congratulations, your home workspace likely qualifies for deductions.

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💸 What Can You Claim?

Here’s what’s commonly deductible:

1. Electricity & Gas (Work Portion Only)
   • Use the fixed rate method (e.g. 67 cents/hour from 1 July 2022 onwards)
   • No need to calculate individual utility bills — just track your work hours
2. Office Equipment & Furniture
   • Items like desks, chairs, laptops, and monitors
   • You can either depreciate large items over time or claim small purchases outright (if under the threshold)
3. Internet & Phone
   • Claim a portion of your home internet bill, based on work usage
   • Similar to your mobile — only the work-related % is claimable
4. Stationery & Admin Supplies
   • Notebooks, pens, diaries, folders, printer ink, etc. used for client-related tasks

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📅 Method Matters: Fixed Rate vs Actual Cost

• Fixed Rate Method: Easier, less paperwork — just track your hours.
• Actual Cost Method: More effort but might result in a bigger claim (if you have lots of expenses).

Tip: Use whichever method gives you the higher deduction, and keep good records either way.

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🧠 Pro Tip:

You don’t need a separate home office room to make a claim — just a regular space where you consistently do work tasks.

Record Keeping and ATO Compliance Tips

Even if you’re eligible to claim a range of deductions, it means little without proper documentation. The ATO takes record keeping seriously — and as an NDIS worker, so should you.

Depending on your employment status and award, the Fair Work Ombudsman’s disability services guide can help clarify what obligations and reimbursements you may already be entitled to — which impacts what’s deductible

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📁 What Records Do You Need?

To support your deductions, you should keep:

• Receipts or invoices for all work-related purchases
• Bank statements showing relevant transactions
• Logbooks or diaries for car travel and home office hours
• Phone/internet usage records to back up percentage claims
• Training certificates or course confirmations

Digital or physical copies are fine — just make sure they’re legible, complete, and stored securely.

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🕒 How Long Should You Keep Records?

According to the Australian Taxation Office, you must keep tax-related documents for at least five years after you lodge your return. That includes receipts, logs, and correspondence.

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📱 Use Tech to Your Advantage

Apps and tools can make record-keeping easy:

• Xero (if you’re a sole trader, company or need accounting tools)
• ATO myDeductions (free, official)
• Stride (great for mileage tracking)

Back up your records on cloud storage (Google Drive, Dropbox, etc.) to avoid losing them.

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⚠️ What If You’re Audited?

If you claim something without proof — even if it was legit — the ATO can deny it. In some cases, you might even face penalties. So treat your documentation like gold.

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✅ ATO’s Golden Rule: “You must have spent the money, and it must relate directly to earning your income.”

If you follow that guideline and keep clean records, you’re in a great position to claim confidently.

If you’d like tailored help maximising your deductions and lodging with confidence, speak with our Melbourne small business accounting team.

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Frequently asked questions

General Advice Warning: The information provided in this article is general in nature and does not constitute personal financial, tax or legal advice. It has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your own circumstances. Pinnacle Accounting & Advisory is not a licensed financial adviser. For advice tailored to your situation, please contact us directly.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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You can claim motor vehicle expenses for work-related driving using one of two ATO methods: the cents per kilometre method (88 cents per kilometre for 2025-26, capped at 5,000 business kilometres) or the logbook method (your actual running costs multiplied by your business-use percentage). Ordinary home to work travel is not deductible.

If you use your car for work, you could be leaving hundreds — or even thousands — of dollars on the table at tax time. Motor vehicle expenses are one of the most commonly claimed tax deductions in Australia, but they’re also one of the most frequently audited. Get it right and you maximise your refund. Get it wrong and the ATO will be in touch.

This guide covers everything you need to know: who can claim, which method gives you the biggest deduction, what records the ATO actually requires, how company-owned cars and novated leases work, and the most common mistakes that trigger an audit. Whether you’re an employee, sole trader, company director, or business owner — this is your definitive 2026 reference.

Can You Claim Motor Vehicle Expenses on Tax?

Yes — but only for work-related travel. The ATO draws a hard line between private use and work use, and you can only claim the portion of your vehicle expenses that relates to earning your income.

Employees

If you’re an employee, you can claim car expenses when you use your own vehicle (not a company car) for work purposes. This includes:

• Driving between two separate workplaces on the same day
• Travelling from your workplace to a client’s premises, a job site, or another work location
• Carrying bulky tools or equipment that cannot be stored at work
• Attending work-related conferences, meetings, or training away from your usual workplace

What you cannot claim as an employee: The daily commute from home to your regular workplace is not deductible — even if you live far from work, work unusual hours, or there is no public transport available. This is one of the most common mistakes the ATO sees.

Business Owners, Sole Traders and Company Directors

If you run your own business, the rules are more generous. Travel from home to your business premises can be deductible when your home is genuinely your principal place of business. Visits to clients, suppliers, the bank, and other business-related trips are all claimable. The key test is: was the trip made in the course of carrying on your business?

Business owners can also claim through their business entity — either by paying a cents-per-km rate to themselves, or by claiming actual vehicle expenses if the vehicle is owned by the business.

The Two Methods: Cents Per Kilometre vs Logbook

The ATO allows two methods for claiming car expenses on your tax return. You choose one method per car, per income year. You cannot mix methods for the same vehicle in the same year.

For the current figure, see our dedicated guide to the ATO cents per km rate for 2026-27 and how much you can claim.

Feature	Cents Per Kilometre	Logbook
Records required	Diary or notes only	12-week logbook + all receipts
Maximum claim	5,000 km per car per year	No limit
Rate (2025–26)	88 cents per km	Actual cost x business use %
What’s covered	All costs (fuel, rego, insurance, depreciation)	All actual costs in proportion
Best for	Low business use or simple situations	High business use or expensive cars

Cents Per Kilometre Method: Everything You Need to Know

The cents per kilometre method is the simpler of the two options. You multiply the number of work-related kilometres you drove by the ATO’s fixed rate — and that’s your deduction. No receipts required.

The 2025–26 Rate: 88 Cents Per Kilometre

For the 2025–26 financial year, the ATO rate is 88 cents per kilometre. This rate covers all car running costs — fuel, oil, servicing, registration, insurance, and decline in value (depreciation). You do not claim these on top; the 88c/km rate replaces them all.

Financial Year	Rate (cents/km)
2026–27	91 cents
2025–26	88 cents
2024–25	88 cents
2023–24	85 cents
2022–23	78 cents
2021–22	72 cents

How Many Kilometres Can I Claim?

Under the cents per kilometre method, you can claim a maximum of 5,000 kilometres per car, per year. If you drive more than 5,000 work-related kilometres, you should consider switching to the logbook method, which has no upper limit.

The 5,000 km cap applies per vehicle — so if you use two cars for work, you can potentially claim up to 5,000 km on each.

Do I Need Receipts?

No. One of the big advantages of the cents per km method is that you do not need to keep fuel receipts, service records, or registration certificates. However, you do need to be able to show how you calculated your kilometres. The ATO expects you to have a reasonable basis for your claim — a diary of work trips, calendar entries, or a written record of regular routes is sufficient.

Worked Example: Cents Per Kilometre

Sarah is a nurse who drives from her hospital to a second clinic twice a week, plus she attends occasional training sessions. Over the year, she calculates she drove 3,200 work-related kilometres.

Her deduction: 3,200 km x $0.88 = $2,816

Sarah does not need any receipts. She keeps a note in her diary of the routes and why they were work-related. That’s enough for the ATO.

Logbook Method: How It Works

The logbook method lets you claim the actual costs of running your vehicle — but only the portion that relates to work. It requires more record-keeping upfront, but it can produce a significantly larger deduction if your business use percentage is high.

Step 1: Keep a Logbook for 12 Consecutive Weeks

You must keep a logbook for at least 12 consecutive weeks. The ATO’s minimum requirement is that for each trip, you record:

• The date of the trip
• The start and end odometer readings
• The number of kilometres travelled
• The reason for the trip (work purpose)

Private trips do not need to be recorded in detail — just mark them as private. Once you have kept a valid logbook, it is valid for five years — provided your work travel pattern does not change significantly. If you change jobs, move house, or your business circumstances change materially, start a new logbook.

Step 2: Calculate Your Business Use Percentage

At the end of the 12-week period, calculate what percentage of your total kilometres were for work:

Business use % = (Work kilometres ÷ Total kilometres) x 100

This percentage is then applied to all your actual car expenses for the full year to arrive at your deduction.

Step 3: Keep All Your Receipts and Records

Under the logbook method, you need to keep receipts and records for all vehicle expenses throughout the year:

• Fuel and oil receipts (or a fuel card statement)
• Registration and CTP insurance certificate
• Comprehensive insurance policy
• Service and repair invoices
• Loan statements (if the car is financed — interest is claimable)
• Purchase price and date (for depreciation calculation)

Worked Example: Logbook Method

Michael is a self-employed electrician. His logbook shows he drove 18,000 km for the year total, of which 13,500 km were work-related. His business use percentage is 75%.

His actual car costs for the year:

• Fuel: $4,200
• Registration: $900
• Insurance: $1,800
• Servicing and tyres: $1,500
• Loan interest: $3,600
• Depreciation: $5,000

Total actual costs: $17,000

Michael’s deduction: $17,000 x 75% = $12,750

Compare that to the cents per km method: even at the 5,000 km cap, he would only get 5,000 x $0.88 = $4,400. The logbook method gives Michael an $8,350 larger deduction.

Which Method Gives You a Bigger Deduction?

The honest answer: it depends on how many kilometres you drive for work and what your actual car costs are. Here’s a side-by-side comparison for the same vehicle:

	Cents Per Km	Logbook (70% business use)
Work km per year	4,000 km	4,000 km (of 5,700 total)
Total actual costs	N/A	$14,000
Deduction	4,000 x $0.88 = $3,520	$14,000 x 70% = $9,800

In this scenario, the logbook method produces a deduction nearly three times larger — even at the same number of kilometres. This is because the logbook captures depreciation, loan interest, and comprehensive insurance that the cents per km rate does not separately account for.

Rule of thumb:

• Fewer than 5,000 work km per year and a modest car: the cents per km method is usually simpler and still reasonable
• More than 5,000 km, an expensive car, or high business use: the logbook method will almost always deliver a bigger deduction

Not sure which method works best for your situation? Book a no-obligation call with Mina and we’ll run the numbers for you.

What Car Expenses Can You Claim?

What you can claim depends entirely on which method you use.

Under the Cents Per Kilometre Method

The 88c/km rate is an all-inclusive rate. It is designed to cover: fuel and oil, registration, insurance, servicing and repairs, and decline in value (depreciation). You cannot claim any of these separately on top of the cents per km rate.

Under the Logbook Method

You claim the actual cost of running the vehicle, multiplied by your business use percentage. Claimable expenses include:

• Fuel and oil — every fill-up, pro-rated by business use %
• Registration — the full annual rego fee, pro-rated
• Insurance — CTP and comprehensive, pro-rated
• Servicing and repairs — tyres, brakes, routine services
• Loan interest — the interest component of car loan repayments (not the principal)
• Decline in value (depreciation) — based on the car’s cost and effective life
• Lease payments — subject to the car depreciation limit

Note: The ATO imposes a car cost limit on expensive vehicles. For 2025–26, this limit is $69,674. If your car cost more than this, depreciation and lease payments are capped at that amount regardless of the actual purchase price.

Can You Claim Car Registration on Tax?

Yes — but only under the logbook method.

Under the logbook method, your annual registration fee is one of the actual expenses you claim, proportioned by your business use percentage. For example: rego costs $900, business use is 70%, you claim $630.

Under the cents per kilometre method, registration is not claimed separately. It is considered to be already incorporated into the 88 cents per kilometre rate. The same logic applies to CTP insurance: claimable under the logbook method, built into the rate under the cents per km method.

Can You Claim Petrol on Tax?

Yes — petrol is a claimable car expense under both methods, but it works differently in each.

Cents per km method: You do not claim petrol receipts separately. The 88c/km rate already factors in an allowance for fuel. Simply multiply your work kilometres by 88 cents — petrol is included.

Logbook method: You claim your actual petrol costs, multiplied by your business use percentage. Keep all your fuel receipts or use a fuel card that provides monthly statements. If your car uses $4,000 in fuel per year and your business use is 80%, you can claim $3,200 for petrol alone — before adding registration, insurance, and servicing.

Electric vehicle charging costs are treated similarly to fuel and are claimable under both methods on the same basis.

How Many Kilometres Can You Claim on Tax?

This is one of the most searched questions at tax time — and the answer depends on which method you use.

Cents per kilometre method: Maximum 5,000 kilometres per car, per year. If you drive more than this for work, you can only claim 5,000 km under this method. The ATO will not allow a cents per km claim above this limit.

Logbook method: No kilometre limit. If your logbook shows 30,000 work-related kilometres in a year and your business use is 85%, you claim 85% of all actual running costs — there is no cap.

Can I claim 5,000 km without a logbook? Yes — the cents per km method does not require a logbook. You just need a reasonable record of your work trips. But the 5,000 km ceiling applies.

How many cents per kilometre can I claim in 2025–26? For 2025–26: 88 cents per kilometre. For 2026–27: 91 cents per kilometre (the ATO increased the rate from 1 July 2026). Always use the rate that applies to the income year you are lodging for.

Instant Asset Write-Off for Vehicles

For business owners — not employees — there is a third option that can dwarf both standard methods: the instant asset write-off (also called temporary full expensing or simplified depreciation, depending on when you purchased the vehicle).

Under instant asset write-off rules, eligible small businesses can immediately deduct the business-use portion of a vehicle’s cost in the year it was first used or installed ready for use — rather than depreciating it over several years.

How It Works

• Your business must have an aggregate annual turnover below the relevant threshold (currently $10 million for the small business pool)
• The car must be used for business purposes — you can only claim the business-use percentage of the cost
• The car cost limit still applies: for 2025–26, the maximum depreciable cost for a passenger car is $69,674. This cap does not apply to commercial vehicles such as utes, vans, and trucks used primarily for business — those can be written off at full cost (business portion)
• You still need a logbook (or reasonable records) to establish the business-use percentage

Worked Example: Instant Asset Write-Off

Tom is a plumber who operates as a sole trader. He purchases a new work ute for $55,000 (including GST, so $50,000 after GST). His logbook confirms 90% business use.

Tom’s instant asset write-off deduction: $50,000 x 90% = $45,000 — in year one.

Under the logbook method with regular depreciation, Tom might only claim $10,000–$12,000 in year one. The instant asset write-off gives him more than four times the deduction in the first year, dramatically reducing his taxable income.

The rules around instant asset write-off change frequently. Speak with your accountant before purchasing a vehicle to confirm the rules that apply in your current financial year. See our tax planning services for strategic advice on the best timing for asset purchases.

Novated Leases and Tax Deductions

A novated lease is a three-way arrangement between you (the employee), your employer, and a finance company. Your employer makes lease payments on your behalf from your pre-tax salary — which reduces your taxable income. The vehicle is in your name, but your employer is the lessee for the purposes of the lease.

How Novated Leases Work for Tax

With a novated lease:

• Lease payments are deducted from your pre-tax salary, reducing your assessable income
• Running costs (fuel, rego, insurance, servicing) can also be included in the lease and paid from pre-tax salary under a fully maintained novated lease
• Because the car is available for private use, the employer is technically providing a fringe benefit — which means Fringe Benefits Tax (FBT) applies
• Most novated leases are structured to manage or offset the FBT liability, often through employee contributions from after-tax dollars

Electric Vehicles and the FBT Exemption

From 1 July 2022, eligible electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs, until 1 April 2025) provided through novated leases or as company cars are exempt from FBT — provided:

• The vehicle’s value (GST-inclusive) is below the luxury car tax threshold ($91,387 for fuel-efficient vehicles in 2025–26)
• The vehicle is a zero or low-emission vehicle as defined by the ATO
• The car was first held and used on or after 1 July 2022

This exemption makes EV novated leases extremely attractive for employees — effectively providing a government subsidy through the tax system. However, the rules are complex, thresholds change annually, and PHEVs have now lost their exemption. Get proper advice before structuring any EV arrangement.

Can You Claim Car Expenses With a Novated Lease?

No — not separately. With a novated lease, your employer is making the payments and claiming the deductions. You receive the benefit through reduced pre-tax salary. You cannot then also claim car expenses in your personal tax return for the same vehicle. Doubling up is not allowed and would be caught by the ATO.

Company-Owned Vehicles and Fringe Benefits Tax (FBT)

When a business entity — a company or trust — owns a vehicle and makes it available for an employee’s private use (including directors), Fringe Benefits Tax applies. FBT is paid by the employer, not the employee, and is calculated at a rate of 47% on the taxable value of the benefit.

Two Methods for Calculating FBT on Cars

There are two methods for working out the FBT liability on a company car:

1. Statutory Formula Method

The taxable value is 20% of the car’s base value (purchase price), multiplied by the number of days the car was available for private use, divided by 365. This is the simpler method and doesn’t require a logbook — but it assumes 20% of the car’s value is a taxable benefit regardless of actual private use.

2. Operating Cost Method

The taxable value is calculated as total operating costs multiplied by the private-use percentage. This requires a logbook (at least 12 weeks) but can result in a lower FBT liability when business use is high. If business use is above 80%, the operating cost method will almost always produce a lower taxable value.

Reducing FBT Liability

FBT can be reduced or eliminated by:

• Employee contributions: If the employee (or director) contributes to the running costs from after-tax dollars, this reduces the taxable value dollar-for-dollar
• Keeping a logbook: A logbook showing high business use reduces the operating cost taxable value significantly
• Restricting private use: The ATO has specific rules about what counts as “garaged at home” vs. genuinely restricted private use. Vehicles garaged at the employee’s home are generally deemed available for private use
• Exempt vehicles: Certain vehicles are exempt from FBT when private use is limited — including panel vans, utes, and commercial vehicles where private use is only incidental

FBT is one of the more complex areas of vehicle taxation. If your business owns vehicles used by employees or directors, speak with a tax adviser about the best structure. See our Virtual CFO services for ongoing tax-effective business structuring.

Motor Vehicle Expenses for Sole Traders vs Companies

Sole Traders

Sole traders claim car expenses in their business schedule at Item P8 of their individual tax return. They can use either the cents per km method or the logbook method. If you have a vehicle registered to your business and used primarily for business, you may also be eligible to write off the full vehicle cost under instant asset write-off rules — potentially a far larger deduction than either standard method.

Sole traders do not pay FBT on vehicles they use themselves — FBT only applies when an employer provides a car to an employee (a separate person). If you are a sole trader and your spouse uses the vehicle, seek specific advice.

Companies and Trusts

If the vehicle is owned by the company or trust, the entity claims vehicle expenses directly as a business deduction — not the individual. The entity can claim fuel, rego, insurance, servicing, loan interest, and depreciation, multiplied by the business use percentage.

If the vehicle is also available for private use by a director or employee, FBT applies (as outlined above). The entity may also be entitled to claim an input tax credit for the GST on the purchase — subject to the car cost limit and business use percentage.

Employees

Employees claim car expenses at Item D1 — Work-related car expenses in their individual tax return. The deduction reduces taxable income directly.

If your employer pays a car allowance, you must include that allowance as income — but you can still claim actual car expenses (using either method) as a deduction. If your actual expenses exceed the allowance, you get a net deduction. If the allowance exceeds actual expenses, you pay tax on the difference.

If your employer provides a fully maintained company car for private use, Fringe Benefits Tax applies — and you cannot separately claim deductions for that vehicle in your personal return.

Home to Work Travel: Why You Cannot Claim It

This is worth its own section because it’s the single most common error in motor vehicle claims. Travel between your home and your regular workplace is private travel and is not tax deductible.

The ATO does not accept arguments based on:

• The distance being long
• Having no public transport options
• Working irregular or unsocial hours
• Carrying work equipment in the car
• Being on call

The limited exceptions where home-to-work travel may be claimable:

• Your home is your principal place of business (e.g., you run a business from a dedicated home office and travel to client sites or a second work location)
• You are required to transport bulky equipment that cannot be stored at your workplace and there is no alternative — but carrying a laptop does not count
• You travel from home directly to a different workplace that is not your regular workplace on that day

If you’re a tradesperson who picks up materials from home before driving to a site, the ATO has specific rulings on this. Get advice specific to your circumstances before claiming.

What Records Do You Need?

Record-keeping is where most people get unstuck in an ATO audit. Here is exactly what is required under each method:

Cents Per Kilometre Method

• A record of your work-related trips — a diary, calendar, spreadsheet, or logbook app
• Each entry should show the date, start and end location, work purpose, and distance
• No fuel receipts or other expense records are required
• Odometer readings, Google Maps route distances, or a standard route calculation all work as supporting evidence

Logbook Method

• A completed 12-week logbook with all entries (date, start/end odometer, km, work purpose)
• Odometer readings at the start and end of the income year
• All receipts for expenses claimed: fuel, rego, insurance, servicing, loan statements
• Vehicle purchase documents if claiming depreciation

Keep all records for five years after lodging your return. The ATO can audit prior years and will request evidence.

Vehicles That Qualify — and Ones That Don’t

The two ATO methods (cents per km and logbook) apply specifically to “cars” as defined by the ATO: motor vehicles designed primarily to carry passengers, with a load capacity under one tonne and fewer than 9 passengers. This includes most sedans, wagons, SUVs, hatchbacks, and some utes.

Motorcycles, heavy commercial vehicles, and vehicles not meeting this definition are handled differently — typically through the logbook method applied to “other vehicles,” or as direct business expenses if the vehicle is wholly used for business.

If your vehicle is a dual-cab ute or van with a load capacity of one tonne or more, it falls outside the standard car rules. You claim actual business-use expenses without the car cost limit cap — but you still need records to establish the business portion.

Common Mistakes When Claiming Motor Vehicle Expenses

Motor vehicle deductions are one of the ATO’s top audit targets. Here are the mistakes that get people caught:

1. Claiming the Daily Commute

Driving from home to your regular workplace is private travel. The ATO does not accept arguments about distance, inconvenience, or lack of public transport. The only exceptions are when home is a genuine place of business, or when you travel from your regular workplace to another location in the same day.

2. Automatically Claiming 5,000 km Every Year

Claiming exactly 5,000 km every year — especially when your work pattern does not justify it — is a red flag. The ATO cross-references claims against occupation data. Unusually high claims for low-travel roles attract scrutiny.

3. Claiming 100% Business Use

Unless you genuinely use your vehicle exclusively for work, claiming 100% business use is almost always flagged. The ATO expects some private use for most vehicles. Claims above 95% business use for a standard passenger car will likely result in a review.

4. No Records to Support the Claim

The ATO can and does ask for evidence. If you cannot produce a diary, calendar entries, or logbook, your claim will be disallowed — along with potential penalties and interest.

5. Claiming Reimbursed Expenses

If your employer reimburses you for car expenses dollar for dollar, you cannot also claim those same expenses as a deduction. You can only claim the out-of-pocket portion you actually bore yourself.

6. Using the Wrong Vehicle Type Rules

Applying the standard car methods to a motorcycle or heavy commercial vehicle, or forgetting that the car cost limit caps depreciation on passenger vehicles, can mean either under-claiming or over-claiming — both of which create problems.

7. Forgetting the Logbook Has Expired

A logbook is valid for five years. If yours was completed in 2019 and your travel patterns have changed, it may no longer accurately reflect your business use. Using an outdated logbook is grounds for the ATO to disallow or reduce your claim.

ATO’s Key Resources on Motor Vehicle Expenses

The ATO publishes comprehensive guidance on vehicle tax deductions. The main reference pages are:

• ATO: Motor vehicle and car expenses (individuals)
• ATO: Deductions for motor vehicle expenses (business)

Always check the ATO’s website for the most current rates and thresholds, as these are updated each financial year.

FAQ: Motor Vehicle Tax Deductions in Australia

How many km can I claim on tax without a logbook?

Up to 5,000 kilometres per year using the cents per kilometre method. No logbook is required — just a record of your work trips. At 88 cents per km, the maximum claim is $4,400 per vehicle per year for 2025–26.

How many cents per kilometre can I claim in 2025–26?

88 cents per kilometre for the 2025–26 financial year. The rate increases to 91 cents per kilometre for 2026–27. Always use the rate for the income year you are lodging — if you are lodging your 2024–25 return now, the rate is also 88 cents.

Can I claim my car registration on tax?

Yes, under the logbook method. Registration is one of the actual expenses you claim, multiplied by your business use percentage. Under the cents per km method, registration is factored into the 88c/km rate and cannot be claimed separately.

Can I claim petrol on tax?

Yes. Under the logbook method, claim actual fuel costs multiplied by business use %. Under the cents per km method, petrol is included in the 88c/km rate — no separate receipts needed.

Can I claim mileage for travelling to and from work?

No. Travel between home and your regular workplace is private and is not deductible. If home is your principal place of business, travel to client sites may qualify — speak with your accountant about your specific circumstances.

Can I claim car expenses if my employer pays a car allowance?

Yes. The allowance is included in your taxable income, and you claim actual car expenses as a deduction using either method. If actual expenses exceed the allowance, you get a net deduction. If the allowance exceeds actual expenses, you pay tax on the surplus.

How long does a logbook last?

A logbook is valid for five years, provided your work travel pattern remains similar. Start a new logbook if your role, employer, or home address changes significantly, or if the ATO asks you to substantiate a claim.

What is the ATO car cost limit for 2025–26?

$69,674 for 2025–26. If your vehicle cost more than this, depreciation and lease payments are capped at this amount for tax purposes. This limit applies to passenger vehicles — it does not apply to utes and vans with a load capacity of one tonne or more.

Can I claim car expenses for an electric vehicle?

Yes. Electric vehicles are treated similarly to conventional vehicles under both the cents per km and logbook methods. Charging costs replace fuel costs in the logbook method. Eligible EVs provided by an employer through a novated lease or as a company car may also qualify for the FBT exemption — see the section above on novated leases and FBT.

Is a novated lease tax deductible?

Effectively yes — novated lease payments are deducted from your pre-tax salary, which reduces your taxable income. You do not separately claim car expenses in your personal tax return because your employer is making the payments and managing the FBT. The tax saving comes from the salary sacrifice arrangement, not from a separate deduction on your return.

Does FBT apply if a company car is used only for work?

Generally no — FBT only arises when the vehicle is available for private use. If a car is genuinely restricted to business use only (not garaged at the employee’s home, not used on weekends, with written evidence of the restriction), FBT may not apply. However, the ATO scrutinises these claims carefully. A commercial vehicle (ute, van) used only for work may qualify for an FBT exemption more easily than a passenger car.

What triggers an ATO audit for vehicle claims?

The main triggers are: claiming exactly 5,000 km every year, claiming 100% business use on a passenger car, claims that are unusually high for your occupation (the ATO benchmarks by industry), no supporting records, or a sudden large increase in vehicle claims year-on-year. The ATO also uses data matching from employer records and motor registries.

How Pinnacle Accounting & Advisory Can Help

Motor vehicle expenses sound straightforward — until you’re sitting down with your records trying to work out which method is best, whether your logbook is still valid, or why your claim was queried by the ATO.

At Pinnacle Accounting & Advisory, Mina Baselyous (CPA and Chartered Tax Adviser, Melbourne) works with employees, sole traders, and small business owners to make sure vehicle claims are maximised, defensible, and ATO-compliant. We also help clients structure vehicle ownership — whether that’s a novated lease, company-owned vehicle, or sole trader claim — in a way that minimises tax across the entire business, not just at lodgement time.

If you’re unsure whether you’re using the right method, whether your logbook is still valid, whether a novated lease makes sense for your situation, or whether it’s worth switching — a single conversation can save you far more than it costs.

Book a No-Obligation Consultation with Mina

You can also explore our tax planning services or our Virtual CFO services for ongoing strategic tax advice. We’re based in Melbourne and work with clients across Australia.

This article is general in nature and does not constitute personal tax advice. Every situation is different — always speak with a registered tax agent before lodging your return.

If the vehicle you are claiming on cost more than the car limit, the rules change again when you come to sell it. Our guide to selling a car above the car limit works through the GST and the balancing adjustment with a full example.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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ATO audit support means having a registered tax agent manage the process if the ATO reviews or audits your business, from responding to queries and preparing documentation to dealing with the ATO on your behalf. Professional support reduces stress, protects your position, and often improves the outcome.

ATO audit support for businesses is critical when facing a tax review. With proactive accounting systems and expert advisory, your business can navigate ATO audits with confidence.

Whether you’re a sole trader, a growing SME, or managing multiple entities, understanding ATO audit support for businesses is a critical part of financial risk management.

In this article, we’ll break down what triggers an ATO audit, what the process looks like, and how business owners can reduce their risk with strong accounting practices and strategic business advice.

🔍 ATO Audit Support for Businesses: What It Is and Why It Matters

An ATO audit is a formal review of your tax affairs conducted by the Australian Taxation Office to verify that you’re complying with your tax obligations. This could involve your business activity statements (BAS), income tax returns, superannuation payments, payroll, and more.

Audits are often triggered by anomalies or data mismatches, but they’re not always a sign of wrongdoing. Having clean books, clear documentation, and ATO audit support for businesses from professionals makes navigating the process smoother and far less stressful

🚩 ATO Audit Support for Businesses: What Triggers an Audit?

The ATO uses advanced data-matching tools and industry benchmarks to identify businesses or individuals that fall outside normal parameters. Common audit triggers include:

• Inconsistencies between your tax return and third-party data (e.g. banks, employers, real estate)
• Large or unusual GST refunds
• Excessive work-related deductions or claims
• Regular late lodgements or incomplete records
• Performance significantly outside industry norms
• Operating in high-risk industries such as hospitality, construction or cash-heavy businesses
• Complex structures or multiple entities with interlinked finances

As business accountants, we often see that these issues stem from poor recordkeeping or DIY tax strategies. That’s where partnering with a proactive advisor can save you from trouble down the line.

⚠️ ATO Audit Support for Businesses: ATO Audit Penalties: What’s at Stake?

If the ATO uncovers discrepancies or non-compliance, the consequences may include:

• Interest on unpaid taxes
• Penalties ranging from 25% to 75% of the tax shortfall
• Shortfall penalties for under-reported income
• Revised tax assessments
• Legal action in serious cases involving tax evasion

Having an experienced accountant on your side can help reduce penalties and present your case effectively. But prevention is always better than cure—which is why proactive audit readiness is key.

🧾 How to Prepare for an ATO Audit

Here’s how we help clients across Melbourne and Australia stay audit-ready:

1️⃣ Maintain Clear and Accurate Records

Ensure your records are complete, well-organised, and easily accessible:

• Receipts and invoices for business expenses
• Payroll, PAYG, and super records
• Bank statements and reconciliations
• Tax returns and BAS lodgements
• Asset and depreciation schedules

2️⃣ Conduct Internal Reviews

Our business advisory services focus on:

• Analysing your pricing models, margins, and KPIs
• Reviewing internal systems and financial controls
• Identifying potential risks in your operations or structure
• Ensuring compliance with the latest tax rules and changes

3️⃣ Understand Your Tax Obligations

Stay on top of:

• BAS and income tax due dates
• Superannuation and payroll compliance
• PAYG instalments and withholding
• GST, FBT, and record retention requirements

We provide clients with ongoing reminders and reviews to help ensure nothing slips through the cracks.

4️⃣ Seek Professional Representation

If you’re selected for an audit, having trusted accountants and advisors like Pinnacle Accounting & Advisory means:

• Quicker access to records
• Clear communication and negotiation with the ATO
• Less disruption to your day-to-day operations
• Strategic advice to avoid future risks

📅 How Far Back Can the ATO Audit?

In most cases:

• Individuals and small businesses – up to 2 years from the notice of assessment
• Larger entities – up to 4 years
• No time limit – if fraud or tax evasion is suspected

This is why good documentation and systemised recordkeeping is essential beyond just the statutory minimum.

🛡 Why the ATO Conducts Audits

ATO audits are part of its broader compliance program to:

• Enforce tax and superannuation obligations
• Deter fraud and tax evasion
• Encourage voluntary compliance
• Improve taxpayer education and awareness

At Pinnacle Accounting & Advisory, we see audits as an opportunity for our clients to sharpen their systems, improve transparency, and reinforce long-term business resilience.

✅ Final Thoughts on ATO Audit Support for Businesses

An audit doesn’t have to be a crisis. With the right support, your business can be confident, compliant, and ready for anything the ATO might throw your way.

We Help You:

• Set up audit-ready recordkeeping systems
• Ensure strategic structuring and compliance
• Liaise with the ATO on your behalf
• Provide long-term advisory support to reduce risk

Need help with audit readiness or navigating an ATO review?

We work with clients across Melbourne and Australia to deliver clarity, strategy, and peace of mind.

📞 Book a confidential consultation today.
📍 Based in Melbourne, serving clients Australia-wide.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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Building a strong foundation for your business means getting the essentials right from the start: the correct structure, registrations and ABN, accurate bookkeeping, clear financial systems, appropriate insurance, and a plan for tax and cash flow. These foundations make the business easier to run, grow and protect.

Starting a business can be exciting and rewarding, but how you set up your company from day one plays a major role in its long-term success.

When considering setting up a company, it’s essential to understand the implications of your decisions and their long-term effects on business operations.

When it comes to setting up a company, addressing these issues early can save significant trouble down the road.

Understanding the full scope of setting up a company helps ensure your venture is positioned for success.

Many issues we see later, tax inefficiencies, audit exposure, cash flow stress, or legal risk, can often be traced back to poor setup decisions at the beginning.

In this article, we break down the key factors to consider when setting up a company in Australia, why they matter, and how proper planning creates a strong foundation for growth.

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By thoroughly understanding the process of setting up a company, you can avoid common pitfalls.

Why Proper Company Setup Matters

Setting up your company correctly helps you to:

• protect personal assets
• clarify roles and responsibilities
• improve tax efficiency
• support funding and growth
• reduce compliance and audit risk

A well-structured business is easier to manage, easier to grow, and easier to defend if the ATO ever reviews your affairs.

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Properly setting up a company not only helps in management but also opens avenues for growth.

Choosing the Right Company Structure

One of the most important early decisions is choosing the appropriate business structure.

In the journey of setting up a company, understanding the right structure is crucial.

Common options include:

• company
• family (discretionary) trust
• sole trader
• trust with a corporate trustee

Each structure has different implications for tax, liability, cash flow, and compliance.

Choosing the wrong structure early often leads to costly restructuring later. This is why structure decisions should always be made with both short-term operations and long-term goals in mind.

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Limited Liability: What It Really Means

A key benefit of operating through a company is limited liability.

Ultimately, your success will depend on smart decisions made while setting up a company.

A company is a separate legal entity, meaning its liabilities are generally limited to the assets held within the company. Creditors cannot usually access the personal assets of directors or shareholders.

However, limited liability is not absolute.

The concept of limited liability is vital when setting up a company and should be understood by every director.

When setting up a company, knowing that it operates as a separate legal entity is fundamental.

If directors engage in:

• insolvent trading
• fraud
• serious breaches of duty

courts may “lift the corporate veil” and hold individuals personally responsible.

Understanding this balance is critical for risk management and governance.

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Responsibilities of Directors, Shareholders, and Employees

Clear role definition helps prevent disputes and compliance issues.

• Directors have fiduciary duties to act in the best interests of the company
• Shareholders vote on major decisions and appoint directors
• Employees are protected by workplace and superannuation laws

Poor understanding of responsibilities often leads to governance issues that later trigger ATO attention, particularly when financial controls are weak.

Understanding responsibilities in the context of setting up a company is essential for effective governance.

When setting up a company, clear definitions of roles help to streamline operations.

This is closely linked to the importance of understanding your numbers, as discussed in The Truth About Sales & Accounting: Why Knowing Your Numbers Is the Ultimate Business Strategy.

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Funding the Business

Your structure impacts how you can raise funds.

Common funding options include:

• issuing shares
• shareholder loans
• external finance

Companies can issue different classes of shares, which affects:

• voting rights
• dividends
• control

Funding decisions should be made carefully, as they often create long-term tax and compliance consequences.

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Rules That Govern the Organisation

A company’s internal rules are primarily set out in its Constitution.

This document outlines:

• voting procedures
• director appointments and duties
• shareholder rights
• share classes and funding mechanisms

A poorly drafted or ignored constitution can cause major issues when disputes arise or when investors enter the business.

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Choosing the Right Company Name

Your company name should:

• reflect your services or market
• be appropriate and compliant
• be easy to remember

Some words and phrases are restricted or prohibited under Australian law, particularly those implying government affiliation.

Your name is not just a legal requirement, it’s also a branding decision that affects market perception.

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Directors and Board Composition

Companies may have:

• executive directors (day-to-day management)
• non-executive directors (oversight and strategy)

Non-executive directors add value by providing independent judgment and reducing decision-making bias.

Strong governance at this level improves decision quality and long-term outcomes.

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Shareholders and Ownership

Shareholders provide capital and influence direction through voting rights.

In private companies:

• shareholders are usually family members or private investors
• public fundraising is not permitted

Selecting the right shareholders, not just any capital, can significantly affect the company’s future.

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Place of Business and Registered Office

A company may have:

• a place of business (where operations occur)
• a registered office (for official correspondence and records)

These do not need to be the same location but must be properly recorded and maintained.

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Share Structure Explained

Companies can issue:

• ordinary shares (voting + dividends)
• preference shares (priority dividends, limited voting)
• options (rights to acquire shares later)

Share structure impacts control, tax outcomes, and future exit strategies.

Poor planning here often causes issues years later.

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Required Registrations to Operate Legally

Most businesses will need to register for:

• ABN
• GST
• PAYG withholding
• PAYG instalments
• superannuation
• tax file numbers

Missing or incorrect registrations frequently result in compliance breaches and penalties.

Proper systems, including separate accounts, make this far easier to manage, as explained in The 6 Bank Accounts Every Business Owner Needs.

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The Importance of a Business Plan

A business plan provides:

• direction
• risk awareness
• contingency planning
• clarity during difficult periods

While some businesses operate without one, a structured plan helps guide decisions when pressure arises.

Professional input from accountants or advisors often strengthens business plans significantly.

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Takeaway: Set It Up Once, Set It Up Right

Setting up a company in Australia requires more than just registration paperwork.

By carefully considering:

Choosing the right location is a critical factor when setting up a company.

• structure
• governance
• funding
• compliance
• planning

Share structure plays a key role in the decision-making process when setting up a company.

you significantly reduce future risk and increase your chances of long-term success.

If you’re seeking expert accounting and tax advice, Pinnacle Accounting & Advisory works with businesses across Australia to ensure structures are compliant, efficient, and built for growth.

Disclaimer

This article is general information only and does not constitute accounting, tax, or legal advice. Always seek professional advice before making business decisions.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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Understanding required registrations is vital for successfully setting up a company.

Being aware of the legal requirements when setting up a company is crucial for compliance.

A business plan is essential for anyone serious about setting up a company.

Deciding on a plan can guide you through the challenges of setting up a company.

If you’re serious about setting up a company, professional guidance can make all the difference.

In conclusion, setting up a company is a multifaceted process that necessitates careful planning.

The ultimate goal of setting up a company is to create a sustainable and profitable venture.

To avoid common pitfalls, it is advisable to seek assistance in setting up a company.

Lastly, setting up a company can be streamlined with the right systems in place.

A good small business accountant saves you money by planning tax before year end, choosing the right structure, claiming every legitimate deduction, improving cash flow, and helping you avoid costly mistakes and penalties. The savings from proactive advice usually far exceed the fees you pay.

Firstly, we’ll cover the importance of tax planning. Secondly, we will discuss how a robust business strategy can grow your business. Lastly, we will delve into the importance of having a trusted network of professionals to support you on your business journey. These elements are interconnected and can significantly influence your business’s success.

Utilizing a small business accountant effectively can significantly enhance your financial strategies.

Your small business accountant can guide you through the complexities of tax regulations.

Tax Planning with Your Small Business Accountant

Partnering with a small business accountant enhances your understanding and management of financial matters.

Small business accountants possess an in-depth understanding of how to utilize different trading structures. Your small business accountant will ask tailored questions to determine the best structure for your unique situation. For instance, whether a sole proprietorship, partnership, or corporation fits your long-term goals can significantly impact your tax obligations and overall financial health.

A small business accountant can help identify where reinvestment can lead to increased business efficiency.

Engaging a small business accountant allows for customized strategies that fit your business needs.

Consult your small business accountant today to explore how proactive planning can benefit your financial future.

Your accountant will also have comprehensive knowledge of the various tax rates applicable to different trading entities. This expertise allows them to explain the implications of these rates in the context of your business, ensuring you are fully informed about your obligations and opportunities.

With insights from your small business accountant, your business strategy can reach new heights.

This process, known as Tax Planning with your small business accountant, can save you a significant amount of money. By applying legal avenues to minimize your tax liability, you can reinvest these funds into the business, enhancing growth potential. For example, reallocating saved tax funds into strategic marketing campaigns can elevate your brand’s visibility.

Your small business accountant can provide effective recommendations tailored to your objectives.

With these savings, you can reinvest in your business through advertising, purchasing new manufacturing equipment, or expanding your product line. This reinvestment can lead to increased revenue, which will, in turn, boost your overall business profit. Consider the long-term benefits of each investment decision and how they contribute to your growth trajectory.

As Chartered Tax Advisors, we have cutting-edge tax and business knowledge. Our proficiency allows us to cut through the complexities of tax regulations and provide you with clear, actionable advice. We understand that every business is unique, and we tailor our strategies to fit your specific circumstances.

As a result, we are able to save you money on tax and help you grow your business. Our clients have seen firsthand the benefits of proactive tax planning. Why wait? Call us today for a confidential, obligation-free initial consultation. Take the first step towards financial empowerment.

Business Strategy with Your Small Business Accountant

A CPA brings a wealth of commercial understanding of the market. This extensive knowledge is not just theoretical; it translates into practical advice that can help steer your business in the right direction. A good accountant will analyze your current position and help you navigate potential challenges.

This understanding of the market can be broken down into the following seven key areas where the accountant can assist you:

1. Establishing your why
2. Market Analysis
3. S.W.O.T Analysis
4. Marketing Plan
5. Unique Selling Proposition
6. Best trading Structure
7. Connecting you with other professionals

Trusted Network

Establishing your why: Understanding your purpose can guide every decision you make.

Market Analysis: Your accountant can help identify trends and opportunities in the market, ensuring you stay ahead of competitors.

S.W.O.T Analysis: This framework allows you to evaluate your business’s strengths, weaknesses, opportunities, and threats, creating a strategic plan for success.

Marketing Plan: A well-defined marketing strategy is essential for attracting and retaining customers.

Unique Selling Proposition: Clearly defining what sets you apart from competitors can enhance your appeal to customers.

Best Trading Structure: Choosing the optimal trading structure can maximize tax benefits and protect your assets.

Connecting You with Other Professionals: Building a network of support can lead to new opportunities and insights.

Having a small business accountant in your corner helps you navigate through market complexities.

Your small business accountant works with a diverse range of professionals. Thus, they can connect you with experts in various fields, enhancing your business’s support system. This network can provide invaluable insights and resources.

• Commercial Lawyers
• Family Lawyers
• Marketing professionals
• Conveyancers
• Financial advisors
• Auditors
• Finance Brokers
• Mortgage Brokers
• Bookkeepers

Above all, your accountant can connect you with the right professionals who match your unique needs and personality type. This personalized approach to networking can lead to stronger business relationships and more significant opportunities for growth.

Commercial Lawyers: Essential for navigating contracts and legal frameworks.

Family Lawyers: Important for personal legal matters that can impact your business.

Marketing Professionals: Experts who can help you design and implement effective marketing strategies.

Conveyancers: Vital for any property transactions related to your business.

Financial Advisors: They can provide insights on managing investments and pensions.

Auditors: Important for ensuring compliance and accuracy in your financial practices.

Finance Brokers: They can assist in finding the right funding options for your business.

Your small business accountant facilitates connections that are vital for your business’s growth.

Mortgage Brokers: Helpful for acquiring property to grow your business.

Bookkeepers: Crucial for maintaining accurate financial records.

Submit an Inquiry

Your email address will not be published. Required fields are marked with an asterisk (*) for your convenience. If you have any questions or need personalized advice, please do not hesitate to reach out.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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Australian residents pay income tax at progressive marginal rates: nil on the first $18,200, then 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that for 2025-26, plus the 2% Medicare levy. Understanding the brackets helps you plan income, deductions and tax more effectively.

The tax rates for an entity in Australia will be different depending on the type of entity used.

We will go over the rates for the most often used structures.

Entities

We will review the following 7 entities:

1. Individual
2. Partnership
3. Company
4. Discretionary or family Trust
5. Unit Trust
6. Self Manager Superannuation Fund (SMSF)
7. Joint Venture

Individual tax rates

Individual rates tend to be different each year. For the 2021 financial year, the rates were:

These may also need to be paid:

• Medicare Levy (ML); and
• Medicare Levy Surcharge (MLS)

The Medicare Levy rate is 2%

See the table below for the MLS rate:

The thresholds above increase by $1,500. This is to say, for each dependent child after your first kid.

Click here to check the historical individual rates.

Click here to check the historical MLS rates.

Partnerships

A partnership needs to complete a tax return. With that said, the partnership does not itself pay tax. In addition, the partners pay tax if applicable. In other words, if the partner is an individual then they will pay tax. Whereas, if the partner is a trust then the trustee or the beneficiary of that trust is likely to pay the tax.

Company Tax Rates

The company is the most used business entity.

As a result, the rate for a trading company, which is a based rate entity, in the 2022 financial year is 25%. However, if the company is not trading and is not a base rate entity, then the rate is generally 30%.

Subsequently, To learn more about establishing a business click here.

Also, you can check the company rates now by going to the ATO website which speaks more about Changes to company rates.

Discretionary Trust/Family Trust

This entity is not taxed if the beneficiaries are entitled to all the income of the trust. Consequently, If this is not the case, the trustee will be taxed at the highest individual marginal rates.

In addition, the trustee will pay the MLS.

Unit Trust

The ATO does not assess this type of entity. Therefore, unit holders may have to pay tax depending on the type of entity they are. That is to say, the unit holder may be a discretionary trust with one individual beneficiary. As a result, the individual beneficiary will be taxed but not the discretionary trust.

Likewise, a partnership unit holder will not pay tax either but the partner’s will pay tax if they are a company, self managed superannuation fund or individual.

Joint Venture

The tax authorities don’t tax joint ventures. Further, members must avoid receiving income jointly for this to take place. For example, receiving income jointly is raising an invoice as the joint venture.

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Speak with us now

Understanding various tax rates and how the array of entities work together to reduce tax is complex.

Contact us if you require assistance. We offer you a initial consultation to see how we can support your big vision.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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When starting or growing a business, the key tax considerations include choosing the right structure, registering for an ABN and GST, understanding your income tax and PAYG obligations, planning for super and employees, claiming deductions, managing cash flow for tax, and getting proactive advice. Getting these right early saves significant tax and stress.

This article is designed to articulate a high-level general overview of some of the most important tax considerations for those in business and entrepreneurship. The article is not comprehensive in nature and professional advice should be sought to ensure correct application of issues mentioned where required.

Topics Covered

• Hobby or Business
• GST Threshold
• Motor Vehicle Cost limit
• GST on Motor Vehicles
• Payroll Tax
• Superannuation
• Award Rates
• Fringe Benefits Tax (FBT)
• Single Touch Payroll (STP)
• Division 7A

1.   Hobby or Business

A hobby can be considered a business where a profit-making intention can be established, where profit has been made or the acts of a person show there is intent to operate as a business.

The following factors may indicate that a profit-making intention and business exist:

• Registration of a business name
• Obtaining an Australia Business Number (ABN)
• You make a profit
• Repetition of business activities
• The size or scale of the activity is parallel with the activities of other businesses in your industry
• The activity is planned, organised and executed in business like fashion.

The indicators that an activity is planned, organised and executed in business like fashion may include:

• Keeping business records and account books;
• Having a separate business bank account;
• Operation from business premises; and
• In possession of licences and qualifications.

Worth noting is that an activity can begin its life as a hobby and morph into a business. An example is where an individual acquires an SLR Digital camera and proceeds to take photos at events and posts such photos on social media. Such photos receive praise from their viewers and the individual realises they have a natural flare and affinity for photography. They are encouraged to start a business. The individual decides to do just that and begins to plan. From this instant, it could be established the individual has left the territory of photography being a hobby to the pursuit of photography as a business.

Where the hobby has become a business and the activity is generating a loss, you may be able to offset the business loss against your salary and wage income for tax purposes subject to meeting the non-commercial business loss tests. The non-commercial business loss tests are complex and discussion thereof is outside the bounds of this article. You should seek the advice of a qualified tax agent in this regard before applying such tests. 

2.   GST Threshold

The Goods and Service Tax (GST) is a tax payable by the end consumer (other than businesses not registered for GST). Businesses with turnover in excess of $75,000 must register for GST.

Not for profit organisations which provide products or services must charge GST where their turnover is greater than $150,000.

Some businesses are GST exempt, such as those providing medical services and do not need to register for GST. This means they do not include GST in the fees they charge their patients.

However, registering for GST allows such businesses to claim GST credits on items and services they use to conduct their business.

3.   Motor Vehicle Cost Limit

As per the Australian Taxation Office’s definition, a motor vehicle means a motor-powered road vehicle and does not include a road vehicle where the following apply:

• The main function of the vehicle is not related to public road use; and
• The vehicle’s ability to travel on a public road is secondary to its main functions.

Examples of vehicles meeting the above definition include but are not limited to:

• Trucks, tractors and earth moving equipment.

Vehicles purchased are subject to a Motor Vehicle cost limit of $57,581 for the 2019/2020 financial year. This means vehicles purchased above this limit will have deductions, which may cover numerous years, limited to the above-mentioned figure.

This figure is regularly indexed and should be checked each year by referring to ATO guidelines.

4.   GST on Motor Vehicle Cost Limit

If your business is registered for GST, you may be eligible to claim GST credits equal to one eleventh of the Motor Vehicle cost limit.

This usually translates to $5,234.

Other business assets are not subject to this limit and therefore the full GST credits applicable can be claimed.

5.   Payroll Tax

Payroll tax is payable by employers where their payroll exceeds either a monthly or annual threshold provided by each Australian state and territory.

The website below mentions the payroll tax thresholds and percentage rates applicable for each state and territory.

https://www.payrolltax.gov.au/harmonisation/payroll-tax-rates-and-thresholds

6.   Superannuation

Superannuation is required to be paid for each employee where that employee earns $450 or more per calendar month.

The minimum superannuation payable is an additional 10.00% of the wage or salary paid. This should be stipulated in the contract with the employee. Generally, employers combine the salary, wages and superannuation as a total remuneration package offered to their employees.

See link below for table of rates and years to which they apply.

https://www.ato.gov.au/rates/key–superannuation-rates-and-thresholds/?page=22

7.   Award Rates

Certain employee pay is subject to minimum pay rates prescribed by Fair Work Australia. Paying employees in industries such as the hospitality industry below these rates is illegal. To determine the applicable rates for your employees based on the industry in which you operate, navigate to the below mentioned link and search for your industry.

https://www.fairwork.gov.au/

8.   Fringe Benefits Tax (FBT)

Fringe benefits tax is payable at a rate of 47% by employers on benefits provided to employees or the employees associates. This is the case even if the benefit is being provided by an external provider under an agreement with the employer.

These benefits could be the ability to use a company car for the employee’s private purposes or paying for an employee’s holiday. FBT is a complex area of tax and professional advice should be though if you are considering providing benefits to your employees.

9.   Single Touch Payroll (STP)

STP is a new way to report employees’ tax and superannuation information to the ATO. This information is now reported every time a business runs its payroll. This is a standalone process to preparing the Monthly Pay As You Go Withholding statements and the monthly Business Activity Statements where applicable.

As of 30 September 2019, all businesses which employ staff must be registered for STP and report the information to the ATO.

You can navigate to the ATO website using the link below to check out the no cost or low cost platforms available to satisfy the STP reporting obligations.

https://softwaredevelopers.ato.gov.au/no-cost-and-low-cost-solutions-single-touch-payroll

When considering which provider to choose, it is important to determine if such programs integrate with other business systems to ensure a streamlined no fuss solution is implemented.

10.   Division 7A

Where using a company structure in your business then you need to be cognisant of Division 7A of the 1997 Income Tax Assessment Act.

A company is a separate legal entity and stands alone from its directors and shareholders. As such, any income generated by the entity must be provided to shareholders and directors via declaration of a dividend.

Where profits in the form of drawings are taken out of the company without a dividend being declared, Division 7A is triggered and may deem this to be a dividend to which the benefit of possible attached franking credits (also known as imputation credits) is disregarded. This is a disadvantageous spot to be in. Division 7A is another complex area of taxation for which further advice should be thought. 

Conclusion

As can be seen, the above information provides a broad overview of various tax considerations when operating a business. The ATO website is a good resource to use to find out more. Another great website to visit to learn more about money and business is the Australian Securities and Investment Commission’s (ASIC) Money Smart website.

Questions? Fill out the form below and we’ll reach out to you.

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Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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