How to Calculate Your Business Tax Return Estimate

February 20, 2024
minutes to read
Ben Winford
Table of Contents

Did you know that a staggering 90% of small business owners in Australia feel a wave of apprehension when it comes to estimating their tax returns? If you are violently nodding in agreement, you're in for a treat. In this blog, we'll explain how to calculate your tax estimate and unveil a game-changing tool, Thriday. Prepare to bid farewell to tax-induced stress and embark on a journey of empowered financial management that ensures you're not just in control but also maximising your tax breaks. So, grab your metaphorical magnifying glass as we navigate the path to demystifying your business tax return estimate Down Under!

Benefits of Calculating Your Tax Position

Understanding your tax position isn't just about fulfilling legal obligations—it's about gaining control of your financial health. Calculating your tax estimate offers several key benefits:

  1. Financial Planning: A precise tax estimate helps you anticipate your tax liability, allowing you to plan your finances accordingly throughout the year.
  2. Budgeting: Accurate tax predictions help you set aside funds for your eventual tax payment or refund, avoiding last-minute financial crunches.
  3. Strategic Decisions: Knowing your estimated tax liability enables you to make informed decisions about business expenses, investments, and growth opportunities.

How to Predict Your End of Financial Year Tax Estimate

Estimating your tax return involves a mix of financial data, deductions, and a keen understanding of your business's financial health. Here's a simplified step-by-step process:

  1. Gather Financial Information: Collect all relevant financial records, including income, expenses, receipts, and tax-deductible items.
  2. Calculate Total Income: Sum up all income sources, including sales, services, and investments.
  3. Identify Deductible Expenses: Identify deductible expenses, such as business-related costs, office supplies, travel expenses, and employee wages.
  4. Factor in Depreciation: If applicable, consider depreciation of assets, which can be claimed as a deduction over time.
  5. Explore Tax Deductions: Familiarise yourself with tax deductions available for small businesses in Australia. These deductions can significantly reduce your taxable income.
  6. Consult an Expert: Consider seeking advice from a tax professional or accountant for complex financial situations.

How to Calculate Your Tax Estimate

1. Calculate Total Income: Add all your business's income sources for the financial year. This includes sales revenue, fees for services, interest earned, and any other sources of income related to your business activities. Make sure to have accurate records of all these transactions.

2. Deduct Allowable Business Expenses: Subtract your allowable business expenses from the total income. Allowable business expenses are costs directly related to your business operations and are necessary for generating revenue. Examples include employee wages, rent, utilities, office supplies, marketing expenses, and travel costs.

3. Account for Depreciation and Asset Write-Offs: If your business owns assets that are expected to lose value over time (such as equipment, machinery, or vehicles), you may need to account for depreciation. Depreciation allows you to deduct a portion of the asset's value as an expense over its useful life.

Additionally, Australia has various asset write-off incentives for small businesses, allowing immediate deductions for certain asset purchases. Check the Australian Tax Office (ATO) guidelines for the most current information on asset write-offs.

4. Apply Tax Deductions: There is a range of tax deductions that you can apply to reduce your taxable income further. Some common tax deductions for businesses include:

  • Home Office Expenses: If you operate your business from home, you can claim some home-related expenses as deductions.
  • Vehicle Expenses: If you use your vehicle for business purposes, you can claim a deduction for the costs associated with its use, such as fuel, maintenance, and depreciation.

5. Calculate Taxable Income: Once you've deducted allowable expenses and applied relevant deductions, you'll have your taxable income. This is the income that will be subject to taxation.

6. Apply Tax Rate: Australia has a progressive tax system, meaning different portions of your income are taxed at different rates. The current tax rates are as follows:

  • Income up to $18,200: Tax rate of 0%
  • Income of $18,201 to $45,000: Tax rate of 19%
  • Income of $45,001 to $120,000: Tax rate of 32.5%
  • Income of $120,001 to $180,000: Tax rate of 37%
  • Income over $180,001: Tax rate of 45%

7. Calculate Tax Liability: To calculate your estimated tax liability, apply the relevant tax rate to your taxable income based on the progressive tax brackets. The resulting amount is the estimated tax you'll owe to the ATO.

Keep in mind that this explanation provides a general overview of the process. The specific calculations can become more complex based on your unique business situation, eligible deductions, and potential changes in tax laws.

How to Reduce Your Tax Bill

While paying taxes is a civic duty, there's no need to pay more than necessary. Here's how you can legally reduce your tax bill:

  1. Claim Deductions: Maximise your deductible expenses by keeping accurate records of business-related costs.
  2. Utilise Tax Deductions: Explore deductions like home office expenses, vehicle expenses, and contributions to retirement funds.
  3. Prepay Expenses: Consider prepaying certain business expenses to bring down your taxable income for the current year.
  4. Small Business Concessions: Take advantage of Australian Tax Office (ATO) concessions available to small businesses, such as simplified depreciation rules and instant asset write-offs.

How to Increase Your Tax Refund

Everyone loves a tax refund, and there are ways to increase your chances of getting one:

  1. Super Contributions: Contribute to your superannuation fund to reduce taxable income and secure your retirement.
  2. Offset Capital Gains: If you've made capital gains during the year, explore opportunities to offset them with capital losses.
  3. Charitable Donations: Donating to registered charities can make you eligible for tax deductions while supporting a good cause.
  4. Invest in Research: If your business invests in research and development, you might qualify for tax incentives.

When Tax Refunds and Bills Are Due

Understanding tax due dates is crucial to avoiding penalties and interest. In Australia, the tax year ends on 30 June, and individual tax returns are typically due by 31 October. 

How Thriday Calculates Your Tax in Real-Time

Now, here's where things get exciting. Say hello to Thriday—an AI-powered tool that simplifies tax preparation and planning. Thriday uses cutting-edge technology to analyse your financial data in real-time, providing up-to-date tax estimates and insights.

Thriday's features include:

  • Automated Data Analysis: Thriday tracks all your income and expenses and always provides an accurate estimate of your tax position. There is no guesswork involved.
  • Personalised Deductions: Based on your financial data, Thriday identifies the correct tax deductions you can claim. You can even upload receipts as a proof of purchase.
  • Real-Time Updates: As your financial situation evolves, Thriday adjusts its estimates, ensuring you always have the latest insights.

Thriday Tax Estimates

Tax Estimate FAQs

Is Thriday safe to use? 

Absolutely! Thriday uses advanced encryption and security measures to protect your financial data, ensuring your information is secure.

Do I still need an accountant? 

Thriday has expert tax agents who can assist you with any queries. Just reach out to the Thriday team, and they'll be able to help.

How often should I check my tax estimate? 

Regular check-ins are recommended, especially when significant financial changes occur in your business.

Can Thriday help with filing taxes? 

Thriday has a partnership with POP Business, a leading digital accounting firm, and they can lodge your taxes based on your data held within Thriday.

Key Takeaways

Calculating your business tax estimate in Australia doesn't have to be daunting. With the correct information, tools like Thriday, and a proactive approach to managing your finances, you can confidently navigate the world of taxes and ensure your small business's financial success. So, why wait? Take the first step towards hassle-free tax estimation and start planning for your business's financial future with Thriday. Your financial peace of mind is just a few clicks away!

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

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