Tailored tax strategies for practitioners, firms, trades and more

Running a service-based business comes with unique tax opportunities and obligations, whether you’re a health practitioner, design agency, law firm, or builder. While retailers rely on stock and physical goods, your primary asset is your expertise and time. That means your tax strategy should focus on structuring your invoicing and payments, managing deductions, and planning for growth.

Below are practical tax tips to help service-based businesses. Remember, if you’re not sure where to begin, a tax compliance and advisory expert is your best resource — we’re here to help.

1. Track all deductible business expenses

Service-based businesses often overlook legitimate deductions. Keep detailed records of:

• Home office expenses such as equipment and even a portion of electricity, internet, phone bills, or rent (if you have a dedicated office space)
• Business software subscriptions including project management, accounting, and creative tools
• Professional fees for your accountants, consultants, and legal services
• Vehicle expenses if you use your car for client meetings, site visits, or deliveries
• Marketing and advertising costs, including website maintenance, ads, and branding materials

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Categorise and track these expenses year-round to make it easier for you during tax season.

2. Separate your business and personal finances

A dedicated business bank account is essential. It not only simplifies tax time but also provides credibility and clear audit trails.

For sole traders, separating funds helps prevent personal withdrawals from being confused with business transactions. Plus, it’s easier to keep money aside to pay tax when the time comes.

For companies, it ensures proper recording of director wages and dividends.

3. Understand income timing and invoicing

Service businesses often face timing issues. For example, you may complete work before the financial year ends but not get paid until the next financial year. Similarly, deposits may not be considered income immediately upon being paid. Understanding when your income is counted can make a difference to how much tax you pay.

Under cash basis accounting, you only record income when you actually receive payment, and expenses when you pay them. This method helps small businesses manage cash flow, since you only pay tax on money that’s actually in your account.

Accrual accounting means you record income when it’s earned (for example, when you issue an invoice or complete the work) even if payment hasn’t been received yet. Similarly, expenses are recorded when they’re incurred, not when they’re paid. This method gives a more accurate picture of your business’s financial performance and allows you to align your income with costs in the same period.

Review your accounting method annually with your tax advisor to ensure it’s the best option for your cash flow and growth stage.

4. Maximise superannuation and retirement contributions

For consultants and sole traders, making voluntary super contributions can reduce taxable income while building long-term wealth.

For companies and partnerships, paying superannuation on time for employees and directors avoids penalties and ensures your deductions remain valid. In other words, when super is paid by the due date, the ATO allows you to claim those payments as a tax deduction in that financial year. Miss the deadline, and you risk losing that deduction for the year, plus facing potential penalties and interest.

5. Claim depreciation or write-offs on equipment and assets

Every business relies on tools and equipment. Whether it’s office furniture, a laptop, phone, or work vehicle, these can be claimed as either instant asset write-offs or depreciation deductions, depending on the value and timing of your purchases.

Choosing between instant asset write-offs and depreciation depends on your business goals and cash flow. An instant asset write-off lets you claim the full cost of an eligible asset in the same year you buy it, which can be ideal if you want an immediate deduction. But, take note of thresholds and eligibility, which change depending on government policy and the financial year.

Depreciation, on the other hand, spreads the cost of an asset over its useful life, offering smaller deductions each year. This approach can be better for managing long-term tax planning  and is available when an instant write-off is not possible.

To summarise; write-offs help reduce tax quickly, while depreciation provides steadier, ongoing deductions. As your business tax accountant, we can help determine your eligibility for these options, and which suits your situation best. The main thing is to always keep receipts and record purchase dates to make sure you maximise your claims.

6. Manage GST effectively

If your business earns more than $75,000 per year, you must register for GST with the ATO. If you earn less, you can choose to register voluntarily.

If you’re registered for GST, you should:

• Lodge your Business Activity Statements (BAS) quarterly or monthly
• Claim credits for GST paid on business expenses
• Be careful not to claim GST credits for personal purchases

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For businesses nearing the GST registration threshold of $75,000 in Australia, plan ahead. Voluntary registration may sometimes be useful for claiming credits early.

7. Plan for tax throughout the year

Avoid the year-end scramble and plan for tax season in advance. You can prepare by doing things like setting aside a percentage of income for taxes each month, reviewing quarterly financials with your accountant, and making PAYG instalments.

8. Work with a tax professional who knows your industry

Different service-based industries have unique tax nuances:

• Consultants and creatives often have irregular income and project-based expenses
• Agencies, firms and practitioners may have payroll and subcontractor considerations
• Trades and construction must track materials, equipment use, and subcontractor compliance

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An accountant who understands your business model can help you structure your business to manage tax efficiently and ensure compliance with any industry-specific rules.

A proactive tax strategy is a vital part of running a healthy service-based business. By staying organised, understanding deductions, and planning ahead, you can make smarter financial decisions year-round.