If you run a busy trade business, tax can feel like a black box that just keeps taking.
When owners tell us they’re “always overpaying,” it’s usually not one big mistake – it’s a stack of small leaks.
Below we’ve laid out the most common reasons trade businesses in Australia overpay, the ATO rules that sit behind them, and practical fixes you can implement this quarter.
Not tax advice. It’s general information. Get advice for your situation and check the ATO guidance linked throughout this article.
Outline
- Why your PAYG instalments are too high (and what to do)
- GST: credits missed, errors not corrected
- Using (or missing) the $20,000 instant asset write-off
- Motor vehicles: logbooks, methods and common traps
- Structure and company tax rate mistakes
- Super contributions: using the $30,000 cap (and carry-forward)
- Record-keeping: the habit that prevents overpaying
- Quick checklist: where cash leaks (and fixes)
- What to do next
Why your PAYG instalments are too high (and what to do)
Many owners think a big year locked them into big instalments forever. PAYG instalments are based on your last lodged return and then uplifted using GDP factors, so they can drift above reality if your current year is softer or more seasonal.
Good news: you can vary instalments any quarter if they’re too high or too low—just keep evidence for why.
If you’re unincorporated (sole trader or getting distributions from a trust/partnership), check whether you’re getting the Small Business Income Tax Offset (up to $1,000, currently 16% of the relevant tax on small-business income).
GST: credits missed, errors not corrected
Two common leaks:
- Not claiming all GST credits because invoices aren’t complete. You need a valid tax invoice for purchases over $82.50, and suppliers have 28 days to provide one after you ask.
- Leaving mistakes to fester. Many GST errors can be corrected on a later BAS within the ATO’s rules and time limits.
Also confirm you should be registered: most businesses must register when GST turnover hits $75,000 (aggregated).
Using (or missing) the $20,000 instant asset write-off
For 2024–25 the instant asset write-off threshold is $20,000 per asset for eligible small businesses (<$10m turnover), which can reduce taxable income immediately.
The government announced a proposed extension of the $20,000 threshold to 30 June 2026, but note: at various points this has been “announced” before legislation passed—always check current law before you buy.
If an asset is $20,000 or more, it generally goes to the small business pool instead of an instant deduction.
Motor vehicles: logbooks, methods and common traps
Vehicle claims are a classic over/under-claim area. If you’re a sole trader or in a partnership and you’re claiming a car (under 1-tonne payload or <9 passengers), the logbook method requires a 12-week logbook to set your business-use percentage, which you then apply to actual costs.
No logbook? You may need to use the alternative method and could be leaving money on the table if business use is high. Check the ATO definitions for what counts as business travel and keep fuel, rego, insurance and finance records aligned with your method.
Structure and company tax rate mistakes
If you trade through a company, make sure you’re on the right corporate tax rate. Base rate entities (BRE) pay 25% from 2021–22 onwards, while companies that aren’t BREs pay 30%.
Watch Division 7A: taking company money for personal use without a compliant loan or dividend can trigger unfranked dividends and extra tax.
If you’re unincorporated, confirm you’re getting the Small Business Income Tax Offset if eligible. ATO – Small business income tax offset.
Super contributions: using the $30,000 cap (and carry-forward)
Making additional concessional contributions (e.g., salary sacrifice or personal deductible contributions) can cut your taxable income, subject to annual caps and eligibility. The concessional cap is $30,000 from 1 July 2024.
If you haven’t used the full cap in the previous five years and your total super balance conditions are met, carry-forward rules may let you top up and claim more this year.
Record-keeping: the habit that prevents overpaying
The ATO expects accurate records, generally kept for five years, with some categories longer.
Good records ensure you don’t miss deductions, you can support variations (like PAYG), and you can fix errors quickly.
Quick checklist: where cash leaks (and fixes)
- PAYG instalments too high → lodge a variation with rationale and keep evidence.
- Missed GST credits because of incomplete invoices → chase tax invoices and claim within time limits.
- Didn’t use write-offs for sub-$20k assets → check eligibility before 30 June and keep asset records.
- Vehicle claims underdone/overdone → keep a valid 12-week logbook and match your claim method to records.
- Wrong tax rate for your company → confirm BRE status and apply correct 25% or 30%.
- Missed small business offset (unincorporated) → confirm eligibility up to $1,000.
- Super top-ups not used → consider concessional contributions within the $30,000 cap and carry-forward.
What to do next
- Run a 15-minute review of your last two BAS and the current PAYG instalment—note any mismatches to year-to-date profit.
- List purchases you’re planning before 30 June and test them against the current instant asset write-off rules.
- Check vehicle claims: if no current logbook, start one today and keep it for 12 continuous weeks.
- Assess structure settings: confirm company BRE status or, if unincorporated, that you’re getting the offset.
- Tidy records so legitimate deductions and GST credits don’t get missed.
FAQ
Is the $20,000 instant asset write-off definitely available next year?
For 2024–25 it’s legislated at $20,000 for eligible small businesses, and the government announced a proposal to extend it further, but always check status before purchase.
Can I fix a past GST mistake without an amendment mess?
Often yes—ATO allows many GST errors to be corrected on a later BAS within set limits.
I’m a sole trader—am I eligible for any offsets?
You may be eligible for the Small Business Income Tax Offset (up to $1,000) if you meet the rules. Check ATO – Small business income tax offset here.
Do I need to keep a logbook for my ute?
If claiming under the logbook method (sole traders/partnerships for a “car”), yes—12 weeks, then apply business-use percentage to actual costs.
What’s the company tax rate for small businesses right now?
Base rate entities apply 25%; others are 30%—check your BRE status each year.
If you’re unsure which of these applies to you—or want a rapid check on PAYG, GST credits and asset purchases—book a 15-minute strategy call and we’ll map the fixes for your business.