How Much Tax Should a Small Business Put Aside in Australia | Kantor Advisory Group

If you run a small business in Australia and are unsure how much tax you should be putting aside, you are not alone. This is one of the most common issues we see with business owners, and it is also one of the most damaging when ignored.

Most small businesses should be setting aside 25 to 35 percent of profit for tax.

The exact amount depends on your business structure, income level, and whether you are registered for GST. Below is how to work it out properly.

Why small businesses get caught out at tax time

Many business owners focus on revenue instead of profit. Money in the bank feels available to spend, but a large portion of it belongs to the ATO.

The most common mistakes we see are:

• Spending profit before tax is calculated

• Forgetting GST is not business income

• Not planning for PAYG and super

• Leaving tax planning until EOFY

Tax problems rarely happen overnight. They build month by month.

How much tax to put aside by business type

1. Sole traders Sole traders should generally set aside 25 to 30 percent of net profit.This covers income tax and the Medicare levy.
   

2. Companies Most small companies should set aside 25 percent of net profit.This is the current small business company tax rate.
   

3. Trusts Trusts usually require 25 to 35 percent, depending on how income is distributed and the personal tax rates of beneficiaries.

If your business is registered for GST, you should also be holding 10 percent of taxable income separately. GST is never your money.

A simple monthly tax system that works

Every month, you should be doing three things:

1. Calculate your true profit, not revenue

2. Transfer 25 to 35 percent of that profit into a separate tax account

3. Transfer GST collected into the same or a dedicated holding account

If you cannot afford to do this, your pricing or expense structure needs attention.

Why guessing your tax bill is risky

Underestimating tax leads to:

• Cash flow stress

• ATO payment plans

• Poor financial decisions

• Slowed business growth
  

Good tax planning removes uncertainty and gives you control.

How Kantor Advisory Group helps business owners stay ahead

At Kantor Advisory Group, we help business owners understand their numbers before tax becomes a problem. Our focus is proactive planning, not last minute fixes.

We support clients with:

• Ongoing tax forecasting

• Cash flow and profit visibility

• Structure advice to legally reduce tax

• Clear guidance on what money is safe to spend
  

When tax is planned properly, growth becomes simpler.

Final takeaway

If you remember one thing, remember this. If you are running a small business in Australia and not setting aside at least 25 percent of profit, you are underprepared.

Tax should never come as a surprise. If you want clarity on exactly how much your business should be setting aside, speak with an accountant who plans ahead.