Good tax planning is not about finding loopholes or buying things your business does not need. It is about reviewing your financial position before the end of the income year, understanding the tax consequences of decisions already being considered and making sure legitimate deductions are claimed at the correct time.
Waiting until after 30 June can limit your options. By then, the opportunity to purchase and use an eligible asset, pay employee superannuation, write off a genuinely bad debt or complete a trust distribution resolution may have passed.
For businesses with a 30 June year-end, tax planning should ideally begin well before June.
Review Your Estimated Taxable Income
Effective tax planning before 30 June starts with reliable financial information. Your bookkeeping should be current, and all major bank accounts, credit cards, loans, debtors and creditors should be reconciled.
Your accountant can then estimate the year’s taxable income and expected tax liability. This allows you to identify unusual transactions, missing expenses, capital purchases and potential compliance issues before the year closes.
A tax estimate is also a useful cash-flow tool. It gives the business time to prepare for future income tax, GST, PAYG instalment and superannuation obligations rather than being surprised when payments become due.
Bring Genuine Business Expenses to Account
Review expenses incurred in operating the business and check that they have been recorded correctly. Common deductions may include:
- Accounting and bookkeeping fees
- Advertising and digital marketing
- Business insurance
- Commercial rent
- Software subscriptions
- Telephone and internet costs
- Repairs and maintenance
- Professional memberships
- Employee wages
- Eligible business travel
- Interest on business borrowings
The expense must have a genuine connection with earning assessable income. Private expenses are not deductible, while mixed-use expenses must be apportioned.
Timing also matters. Some expenses are immediately deductible, while capital expenditure may need to be depreciated or claimed over several years.
Consider Eligible Prepaid Expenses
Some businesses may be able to claim an immediate deduction for eligible expenses paid before 30 June, even where the services extend into the following income year.
Under the 12-month prepayment rule, eligible small business entities and certain other qualifying businesses may claim an immediate deduction where the service period is 12 months or less and ends no later than the final day of the following income year. If the conditions are not met, the deduction may need to be apportioned over the relevant service period.
Potential prepayments might include eligible insurance, subscriptions, licences or commercial rent. However, simply paying an expense early does not guarantee an immediate deduction. The agreement, service period and general deductibility of the expense must be reviewed.
Review Asset Purchases and the Instant Asset Write-Off
The 2026–27 Federal Budget made the $20,000 instant asset write-off permanent from 1 July 2026, and the measure is now law.
An eligible small business with aggregated turnover below $10 million may immediately deduct the business-use portion of an eligible depreciating asset costing less than $20,000, provided the business applies the simplified depreciation rules and the asset is first used or installed ready for use in the relevant income year.
The threshold applies separately to each asset. Assets costing $20,000 or more are generally added to the small business depreciation pool and ordinarily depreciated at 15% in the first income year and 30% in later years.
Ordering or paying a deposit for an asset before 30 June is not necessarily enough. The asset generally needs to be first used or installed ready for use by year-end. Businesses should not purchase unnecessary equipment merely to obtain a deduction, as the deduction only reduces taxable income and does not reimburse the purchase price.
Review Employee Superannuation
Employers can generally claim a deduction for superannuation contributions made on time to a complying fund for eligible employees and certain contractors. The deduction usually arises when the contribution is made, rather than when it is recorded as payable in the accounts.
From 1 July 2026, Payday Super requires employers to pay superannuation guarantee contributions for each payday. Contributions generally need to reach the employee’s fund within seven business days, subject to limited exceptions.
Business owners should review unpaid super liabilities, payroll clearing accounts and contribution processing times before year-end. Late super can result in super guarantee charge and may not receive the expected tax treatment.
Sole traders and partners cannot pay themselves wages, although they may be able to claim deductions for eligible personal super contributions in their individual returns after satisfying the relevant requirements.
Identify Genuine Bad Debts
Businesses accounting for income on an accruals basis may have unpaid customer invoices that were previously included in assessable income.
A bad debt deduction may be available where the debt is genuinely bad and is written off before the end of the income year. The debt must not be merely overdue or doubtful. There should be evidence supporting the conclusion that there is little or no likelihood of recovery.
The decision to write off the debt should be documented in the accounting records before 30 June. Businesses using cash accounting generally have not included the unpaid amount as assessable income, so they ordinarily cannot claim an income tax deduction for writing it off.
Review Trading Stock and Obsolete Inventory
Businesses carrying trading stock should complete an accurate year-end stocktake and identify damaged, obsolete or slow-moving items.
Opening and closing stock values affect taxable income. Stock should not be written down simply to reduce tax, but available valuation methods may produce different outcomes where they are properly supported and consistently applied.
Maintain stocktake records, valuation calculations and evidence supporting any reduction in value. This is particularly important where inventory has become obsolete because of technological changes, expiry, damage or reduced market demand.
Finalise Trust Distribution Resolutions
Trustees of discretionary trusts generally need to make valid resolutions dealing with the trust’s income by 30 June. The resolution must comply with the trust deed, clearly identify the intended beneficiaries and properly deal with any income intended to be distributed.
If an effective resolution is not made on time, the trustee or default beneficiaries may be assessed instead, potentially at an unfavourable tax rate. Resolutions should never be backdated.
Trustees should also review any family trust election or interposed entity election before making distributions. A distribution outside the relevant family group can trigger family trust distribution tax at 47%.
A distribution should have a genuine commercial and legal effect. It should not be based solely on which beneficiary has the lowest marginal tax rate.
Review Capital Gains and Losses
If the business or its owners have disposed of shares, property, goodwill, cryptocurrency or other CGT assets during the year, calculate the expected capital gain before 30 June.
Current-year and prior-year capital losses may generally offset capital gains, but capital losses cannot ordinarily reduce salary, business or other ordinary income.
Do not sell an asset purely for tax reasons. The transaction should make commercial sense, and artificial arrangements designed mainly to generate a tax loss may attract ATO attention.
Do Not Ignore ATO Debt
General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer income tax deductible. This applies even where the underlying tax debt relates to an earlier income year.
Review outstanding ATO liabilities and existing payment arrangements as part of year-end planning. Because GIC compounds daily, using the ATO as a source of business finance can become expensive.
Frequently Asked Questions
Q1. When should a business start tax planning?
Ideally, tax planning should begin several months before 30 June. This provides time to update the accounts, estimate taxable income and implement legitimate strategies before the financial year closes.
Q2. Should I buy an asset purely to reduce tax?
Generally, no. The instant asset write-off is a deduction, not a refund. A purchase should meet a genuine business need and be affordable after considering cash flow.
Q3. Can I prepay expenses before 30 June?
Some eligible prepayments may qualify for an immediate deduction under the 12-month rule. The deductibility depends on the nature of the expense, the service period and the business’s eligibility.
Q4. Can tax planning be completed after 30 June?
Tax returns and year-end accounts can be prepared after 30 June, but many planning actions must occur before year-end. Backdating documents or transactions is not acceptable.
Arrange Your Year-End Tax Planning Review
Kintax Accountants can review your current accounts, estimate taxable income and identify legitimate year-end tax planning opportunities relevant to your business structure and circumstances.
Contact Kintax Accountants
Phone: 0399393692
Email: info@kintax.com.au
Office: Level 1, 287A Spring Street, Reservoir VIC 3073
Enquiries: Request a consultation
Based in Reservoir, Kintax Accountants assists sole traders, companies, trusts and other businesses throughout Melbourne’s northern suburbs and greater Melbourne with tax planning, business accounting, bookkeeping, BAS and compliance.
Important information: This article provides general tax and accounting information only. It does not constitute tax, financial or legal advice specific to your circumstances. Tax planning strategies must comply with the law and have regard to each taxpayer’s facts, timing and documentation.
