Business Financial Planning

Personal services income is income that is mainly a reward for your personal skills or effort, rather than income produced by a business structure, assets or a team of staff. It matters because once the PSI rules apply, the deductions available to you shrink significantly, regardless of whether you operate as a sole trader, through a company, or through a trust. This guide sets out how to tell whether the PSI rules apply to you, and what changes if they do.

Every startup needs capital before it needs almost anything else, and the right source depends on how much you need, how fast you need it, and how much control or equity you are willing to give up. This guide covers the realistic funding paths available to an Australian startup, including the ones a bank's own guide will not mention.

Australia has four main business structures: sole trader, partnership, company and trust. Each structure changes how you are taxed, how much personal liability you carry, how you report to the Australian Taxation Office (ATO), and how you register the business. The right structure depends on your income, your risk, and your growth plans.

For most of your working life, your super quietly accumulates in whatever fund your employer uses as default. But as your balance grows, the question of which type of super fund structure is right for you becomes more financially significant. The difference between a well-structured super arrangement and a poorly suited one compounds over decades into a material difference in retirement wealth.

Building wealth in Australia involves a set of strategies that are meaningfully different from those in other countries. Australia’s superannuation system is the most tax-effective savings vehicle available to most Australians. The 50% CGT discount for assets held for more than 12 months changes the after-tax returns on shares and property significantly. Dividend imputation (franking credits) on Australian shares allows investors to receive a credit for tax already paid by the company. And the progressive income tax system means the structure of your wealth and the timing of income can dramatically affect how much tax you pay on the returns you earn.

Most small business owners do their financial planning reactively: they look at the bank balance when a big expense comes up, check whether there’s money for a hire when the workload gets heavy, and think about taxes in June because their accountant called. This approach works until it doesn’t, which is usually when a slow quarter, an unexpected tax bill, or a missed growth opportunity makes the cost of not planning very clear.

Every dollar you spend running your business that qualifies as a tax deduction reduces your taxable income and therefore your tax bill. For an Australian small business paying a 25% company tax rate, a legitimate $10,000 deduction is worth $2,500 in tax savings. At a 37% marginal rate for a sole trader, it is worth $3,700.

Whenever economic downturns happen, most businesses and individuals tend not to survive the financial effects. Keep reading to learn how to navigate economic downturns with financial planning.