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Although EOFY has passed, confusion around tax time often carries on well into the new financial year for small businesses and workers.
The most common EOFY tax questions answered
07 July 2025
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10 minute read
Tish Bhagwandeen, a QuickBooks accountant and founder of Infinance Solutions, has offered some much-needed clarity for small businesses and workers on their tax queries as the new financial year kicks off.
1. What are the new tax changes for 2025?
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“One of the biggest questions on SMB owners’ minds this year is how the federal government’s Stage 3 tax cuts will affect them. While changes won’t begin until 1 July 2026, it’s worth planning ahead,” Bhagwandeen said.
Key confirmed changes:
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From 1 July 2026, the 16 per cent tax rate drops to 15 per cent.
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From 1 July 2027, it drops again to 14 per cent.
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The $20,000 instant asset write-off has also been extended for eligible businesses with a turnover under $10 million.
“These cuts are designed to ease the cost of living and help address bracket creep.”
2. What can I claim as a business tax deduction?
“You can generally claim a tax deduction for most expenses you incur while running your business, as long as they are directly related to earning your assessable income,” Bhagwandeen said.
“Assessable income refers to the income you earn that is subject to tax. This includes revenue from sales, fees for services, interest income, and other earnings from your business activities.”
A deduction cannot be claimed for:
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Private or personal expenses (e.g. groceries, clothes for personal wear)
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Entertainment costs (e.g. client lunches or staff parties, with limited exceptions)
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Fines or penalties (e.g. parking tickets)
3. How much tax does a small business pay?
“You will be a small business entity if you're an individual, partnership, company or trust that is carrying on a business, and has an aggregated turnover of less than $10 million.”
“Your business structure determines your tax rate,” Bhagwandeen said.
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Sole traders: Taxed at prevailing marginal rates. The marginal rate of tax refers to the percentage of tax you pay on each additional dollar of income you earn within a specific income bracket. This means your income is taxed in tiers or brackets, and as your income increases, the rate of tax applied to each extra dollar increases.
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Partnerships: Partnerships themselves are not taxed as separate entities. Instead, the income (or loss) of a partnership is passed through to the individual partners, who are then taxed personally on their share of the net income. As an example
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If a partnership earns $100,000 profit and there are two equal partners:
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Each partner will declare $50,000 as income in their personal tax return.
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Each partner will then pay tax on their share based on their own marginal tax rate.
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Trusts: Trusts are not taxed as separate taxable entities in the same way companies are. Instead, the tax treatment of a trust depends on who receives (or is entitled to) the trust income.
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If a trust distributes income to beneficiaries, the beneficiaries are taxed on their share of the net trust income, not the trust itself. Beneficiaries include this income in their personal tax return. They pay tax at their own marginal tax rate. This includes adult individuals, companies, or even other trusts.
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If the trust does not distribute all of its income (i.e. has undistributed income). The trustee is taxed on that amount at the highest marginal tax rate (currently 45 per cent) plus the Medicare levy. This is designed to discourage income accumulation in trusts without distributing it.
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Small business companies: Small businesses are taxed as separate legal entities, meaning the company itself pays tax on its taxable income, not the owners or shareholders directly (unless profits are distributed). The tax rate of 25 per cent applies to base rate entities, which are typically most small businesses.
4. How do I do my business tax return in Australia?
“If you are an individual/sole trader business and you are confident in preparing and lodging your own tax return, you can do so via MyGov,” Bhagwandeen said.
“For other types of entities, you will either need to lodge via a standard Business reporting enabled software or lodge paper returns, although paper returns can be quite complex and there is a high risk of manual errors.”
It is recommended to use the services of a registered tax agent to prepare and lodge returns for the following reasons:
- Ensure the return is accurate and compliant.
- To help maximise deductions and increase the refund.
- Offer extended lodgment deadlines.
- To handle ATO communications and disputes.
- Provide expert support for complex tax situations.
- To give peace of mind and reduce the risk of errors, penalties, or audits.
5. Do businesses have to pay taxes?
“In Australia, businesses must pay tax if they have taxable income, which is the profit left after deducting allowable business expenses from assessable income.
“Taxable income = assessable income (e.g. sales, interest) – allowable deductions (e.g. rent, wages),” Bhagwandeen said.
Who pays tax?
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Sole traders and partnerships, taxed at the owner’s personal tax rate.
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Companies, taxed separately, typically at 25 per cent for small businesses.
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Trusts usually don’t pay tax directly – beneficiaries are taxed on their share.
“If a business has no taxable income (e.g. due to a loss), it may not owe tax and may carry the loss forward to offset future income.”
6. When is business tax time?
“The Australian financial year runs from 1 July to 30 June. The end of this period marks the start of tax time, where businesses prepare and lodge their income tax returns.
“Lodging without a tax agent? Deadline = 31 October of the same calendar year.
“With a tax agent? You may qualify for an extension to 15 May the following year (if registered before 31 October and lodgement history is up to date),” Bhagwandeen said.
7. How do I get or find my business tax file number?
Your TFN can be found via:
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The Business Portal accessed via Relationship Authorisation Manager (RAM) for companies, trusts, etc.
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The MyGov Portal for individuals.
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Or by contacting the ATO directly.
8. How do I lodge my business tax return?
It’s always advised to utilise the services of a registered tax agent to lodge your tax return. If you do not use a tax agent, then:
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Individuals/sole traders can lodge their returns on the MyGov portal.
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Partnerships/trusts/companies can lodge a paper return and post this return to the ATO, or they can lodge using a standard business reporting software.
9. How long do I need to keep business tax records in Australia?
Five years is the minimum time business records must be kept that:
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Explain transactions.
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Are in writing (digital or paper).
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Are in English or easily translated.
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Failing to do so may result in financial penalties or require completion of a record-keeping course (or both).
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