Effective tax planning is essential for sole traders and partnerships in Perth who want to maintain profitability, reduce liabilities, and remain compliant with tax obligations. Unlike companies, sole traders and partnerships are not separate legal entities, meaning the individual owners are personally responsible for reporting and paying tax on the business’s income.
Whether you’re a tradie, freelancer, retailer, or running a family business, working with an experienced business tax accountant in Perth can help you understand your obligations and structure your finances for long-term growth.
- Understand Your Tax Structure
As a sole trader, your business income is treated as your personal income. You lodge a standard individual tax return and pay tax at marginal rates.
For partnerships, the business itself doesn’t pay tax. Instead, each partner declares their share of the income (or loss) in their own tax return, based on the agreed profit-sharing ratio. The partnership must still lodge a partnership tax return for record-keeping purposes.
A qualified small business tax accountant in Perth ensures your income is reported accurately and in compliance with ATO rules.
- Claim All Eligible Business Deductions
Both sole traders and partnerships can claim tax deductions for business-related expenses. These include:
- Rent for business premises
- Vehicle and travel expenses
- Equipment and tools
- Marketing and advertising costs
- Accounting and legal fees
- Work-related phone and internet costs
It’s essential to keep accurate records of all expenses, supported by receipts or invoices. Your business accountant in Perth will help identify deductions specific to your industry and ensure they are claimed correctly.
- Superannuation Contributions
Although not compulsory for sole traders or partnerships, making personal super contributions is a smart tax strategy. Contributions made to your super fund may be tax-deductible and can help reduce your assessable income.
If you employ staff, superannuation payments are mandatory and must be made before the due dates to claim deductions. Your accountant can guide you on super contribution caps and ensure payments are lodged correctly.
- Consider Income Splitting in Partnerships
Partnerships allow for income splitting, which can be a valuable strategy for minimising overall tax liability. By allocating a greater share of the income to a lower-income partner, the overall tax burden for the business can be reduced—provided the profit-sharing arrangement is fair and supported by a valid partnership agreement.
A business tax accountant in Perth can structure your partnership to maximise tax efficiency while meeting legal requirements.
- Use Instant Asset Write-Offs and Depreciation
Eligible sole traders and partnerships can immediately deduct the cost of certain business assets, such as machinery, tools, and office equipment, under the instant asset write-off scheme or temporary full expensing rules (if available for the tax year).
Larger purchases that don’t qualify for instant write-off can still be depreciated over time. Your accountant will determine the most effective way to claim asset-related deductions.
- Track GST and BAS Obligations
If your annual turnover exceeds $75,000, you must register for GST and lodge Business Activity Statements (BAS) regularly. This involves:
- Charging GST on taxable sales
- Claiming GST credits on business purchases
- Lodging and paying GST to the ATO
A business accountant in Perth can manage your BAS lodgements and ensure accurate GST reporting.
- Separate Business and Personal Finances
One of the most common mistakes among sole traders and partnerships is mixing business and personal finances. Set up a dedicated business bank account and, if applicable, use accounting software like Xero or MYOB for accurate tracking.
Separating finances makes it easier to prepare tax returns, calculate deductions, and demonstrate compliance during audits.
- Plan for Your Tax Payments
Since tax is not withheld from your business income (as it would be if you were an employee), it’s crucial to plan for tax liabilities. Consider setting aside a portion of your earnings each month and making quarterly PAYG instalments to avoid surprises at year-end.
Your small business tax accountant in Perth can help forecast your tax obligations and set up a manageable payment schedule.
- Review Your Structure Annually
While operating as a sole trader or partnership is common in the early stages of business, these structures may become less tax-effective or riskier as your business grows. Consider reviewing your structure annually to determine if transitioning to a company or trust might provide better tax benefits and asset protection.
Your business accountant in Perth can guide you through the pros and cons and manage the transition process if needed.
Conclusion
Sole traders and partnerships in Perth face unique challenges and opportunities when it comes to tax planning. By proactively managing deductions, super contributions, GST obligations, and income allocations, you can improve your financial outcomes and reduce stress at tax time.
Partnering with a trusted business tax accountant in Perth ensures you remain compliant, take advantage of all available benefits, and are better prepared for the future.
Need expert help with your tax planning?
Visit our website https://perthtaxpeople.com.au/business-accountants-perth/ to speak with a professional small business tax accountant in Perth who understands the needs of local sole traders and partnerships.
Frequently Asked Questions
Q1: Do sole traders need to lodge a separate business tax return?
No. Sole traders report their business income in their individual tax return using a Business and Professional Items schedule.
Q2: Is superannuation compulsory for sole traders?
No, but making personal super contributions is a great way to save for retirement and may provide tax benefits.
Q3: Can I employ staff as a sole trader or partnership?
Yes. You must meet all employer obligations, including PAYG withholding, superannuation, and workers’ compensation insurance.
Q4: What accounting software is best for sole traders and partnerships?
Platforms like Xero, MYOB, and QuickBooks are widely used and provide features tailored to small business needs.
Q5: When should I consider changing my business structure?
When your income increases, risk exposure grows, or you want to access different tax benefits. Speak with a business accountant in Perth to review your options.
