Why You're Paying Too Much Tax (5 things a Tax Strategist Can Do About it)
Why You're Paying Too Much Tax
5 things a Tax Strategist can do about it
Why You're Paying Too Much Tax (and 5 Things a Tax Strategist Can Do About It)
If you've been running a business for a few years and you have a nagging feeling that your tax bill is bigger than it should be, you're probably right.
Most established small business owners are legally paying more tax than they need to. Not because they're doing anything wrong, and not because their accountant is doing a bad job. It's because nobody is doing proactive tax strategy work on their business. And in Australian tax, if you're not actively planning, you're overpaying by default.
Here are the five most common reasons small businesses overpay tax and what a tax strategist can actually do to fix each one.
1. You're in the wrong business structure
This is the single biggest one. Most business owners set up their structure in year one, when the business looked completely different from what it looks like now. A sole trader setup that made sense at $200k in revenue is often actively costing you money at $1.5M.
The main structures for Australian small businesses are: sole trader, partnership, company, and trust, or combinations of these. Each has different tax implications, different asset protection profiles, and different flexibility for how you can pay yourself.
A tax strategist reviews whether your current structure is still the best one for the business you have now - not the business you had when you set it up. Restructuring isn't always right, and it comes with its own costs. But when it is right, it can permanently reduce your tax bill by tens of thousands of dollars a year.
2. You're timing decisions poorly
Timing is one of the most underrated levers in tax planning. When you buy an asset, when you pay a bonus, when you make a super contribution, when you invoice a large job - all of these have tax consequences that change depending on which financial year they fall into.
Without proactive planning, timing gets driven by convenience. You buy the equipment when the supplier can deliver it. You invoice when the job's done. You pay the bonus when payroll runs. Every one of these is a defensible decision but they add up to a tax bill that's higher than it needed to be.
A tax strategist looks at your projected profit, your current tax position, and helps you sequence decisions so that they work in your favour. This can shift meaningful money, sometimes moving deductions into higher-tax years or income into lower-tax ones.
3. You're missing deductions
Most business owners claim the obvious deductions: rent, wages, vehicle expenses, professional fees. What tends to get missed are the deductions that require you to know they exist and to have structured things properly to claim them.
Examples that come up regularly with new clients:
Home office expenses where the business owner works from home part-time
Depreciation on assets that have never been properly recorded
Prepaid expenses that can be claimed in the current year
Legitimate business use of vehicles, phones, and internet
Insurance premiums that qualify as business deductions
Bad debts that should have been written off
A tax strategist audits what you're currently claiming and identifies what you're eligible to claim but aren't. Small individually … meaningful when added up.
4. You're not using super strategically
Superannuation is one of the most tax-effective ways for a business owner to build long-term wealth. Concessional contributions are taxed at 15% inside super instead of your marginal rate outside it. For most established business owners, that's a difference of 15 to 30 percentage points.
But most business owners either don't use their concessional cap at all, or use it in a haphazard way that doesn't coordinate with the rest of their tax planning.
A tax strategist works out how much super you should be contributing each year based on your overall position … using catch-up contributions where available, splitting contributions between spouses where beneficial, and coordinating super decisions with the timing of business income.
Done well over ten years, this alone can shift hundreds of thousands of dollars of wealth from the tax office to your retirement.
5. Your accountant isn't looking beyond compliance
This is the overarching reason. All of the above happen because most established small businesses have a compliance-focused tax accountant, not a strategist. Their job is to lodge accurate returns, and they do that well. But nobody is looking at the bigger picture, and nothing changes year to year except your revenue and your tax bill.
The fix isn't to fire your accountant. In many cases, they're perfectly good at what they do - they were just hired to do compliance, not strategy. The fix is to add the strategy work, either through them if they offer it or through someone who does.
At Tax by Lily, this is exactly what we do. Every new client starts with a Know Your Number call, where we look at your structure, your last return, and your current setup - and identify the biggest opportunities to legally reduce what you're paying. From there, we handle the ongoing tax strategy and tax accountant work through the year, so the plan actually gets implemented.
How to know if this applies to you
If any of the following is true, you're almost certainly overpaying tax:
Your tax bill has grown alongside your revenue but you don't fully understand why
You've never had a proactive conversation with your accountant about reducing your tax
Your business structure hasn't been reviewed in the past three years
You only hear from your accountant at lodgement time
Your business is doing well but your take-home doesn't reflect it
The good news is, once you know you're overpaying, fixing it is a lot easier than you'd expect. And the savings are usually significant enough to more than cover the cost of getting proper tax strategy in place.
Wondering how much tax you're overpaying? A Know Your Number call will show you in under an hour. Book yours Today!
