What is tax optimisation?

As we reported last month, this time of year, EOFY, is busy with new businesses emerging and existing ones moving from sole traders to partnerships or companies. At North Advisory, we see a healthy amount of activity in this space, highlighting the value of starting your own business and leveraging expert business accounting advice to ensure it is sustainable and creates a financial environment where the business can grow into a partnership or company structure.

With this in mind, it is appropriate to revisit an early article and discuss the strategy around tax optimisation as opposed to tax minimisation.

Tax minimisation is essential; however, it is a reactive strategy centred on minimising tax in the current financial year. Tax optimisation is a proactive strategy when a business moves from a sole trader structure to a partnership or company entity. Your tax advisor’s role is paramount in establishing the most appropriate structure to optimise long-term taxation efficiencies through strategic tax planning.

If you’ve been a sole trader for a few years, you’ll know that your tax optimisation is limited. Your business income is taxed at your marginal rate with little wriggle room for any significant strategic tax planning. When your business transitions to a partnership or company, options are available to implement a planned strategy to optimise your tax position.
For example:

A partnership structure can allocate income between partners in a way that distributes tax burdens.
In a company structure, the entity is exposed to a fixed corporate tax rate of 25% for businesses with less than $50M in turnover, significantly lower than the top personal marginal tax rate of 47%.

While alleviating and distributing tax is a primary driver, with the correct structure, tax optimisation also enables scalability, succession planning, and asset protection.

Before we move on to the additional benefits that partnerships and company structures provide, initial and ongoing costs are associated with structuring your business for tax optimisation.

While costs will vary between accounting practices and the complexity required, the costs below provide reasonable ballpark figures.

Partnership:

• Business name registration $42 for 1 year or $98 for 3 years (ASIC).
• Partnership agreement (optional but recommended): $300–$1,500 legal fee.
• Tax return preparation: $500–$2,000 per year, depending on complexity.
• BAS: around $300–$500 per BAS.
• Bookkeeping and admin: $100–$500/month.

Company:

• Company registration (ASIC): $576 as of 2025.
• Business name registration (if trading name differs from company name): $42–$98.
• Legal incorporation pack (optional): $200–$1,000 if using professional services.
• ASIC annual review fee: $310.
• Annual financial statements and tax return: $1,000–$3,000.
• BAS: around $300–$500 per BAS
• Payroll setup & STP reporting: $600+ annually

Trust – Discretionary or Family

• Trust Deed legal drafting: $300–$2,500 depending on provider.
• Stamp duty on trust deed varies by state:
  NSW: $500.
  VIC: $200.
  QLD, SA, WA: May be nil, or under $500.
• Annual tax return and distribution minutes: $1,000–$2,500.
• BAS: $300–$500 per BAS
• $576 ASIC setup fee + $310 annual ASIC fee if using a company as a trustee:

Structured discretionary trusts offer key advantages in tax planning.

• Flexible income distribution to beneficiaries provides options for lowering tax rates.
• Asset protection and intergenerational wealth planning.
• Ideal for family-run businesses and businesses with fluid ownership needs.

Unlike a tax minimisation strategy, this planning style is proactive and predictive.

A company structure provides flexibility:

• Profit is retained within the company at the lower tax rate.
• Dividends or salary payments can align with years of lower personal income.
• Timing the sale or disposal of assets strategically can mitigate capital gains tax (CGT)

As income matures and investment becomes a consideration, a tax-optimised structure such as a Self Managed Super Fund (SMSF) is effective. An SMSF is afforded a concessional tax rate of 15% on investment earnings and 0% in the pension phase and offers superior control over investment decisions. For business owners, an SMSF can support tax-advantaged exit planning or business succession, not something a sole trader considers; however, it is essential for a growing business.

While tax minimisation is a reactive strategy, tax optimisation looks at longer term questions.

• What tax position is most beneficial over a 3–5 year period?
• How can profits be reinvested for greater tax efficiency?
• What structure aligns with future growth, investment, or sale?

When a business owner thinks about tax, there are two pillars: tax minimisation and tax optimisation. The two are different. As a sole trader, tax minimisation is the primary tax consideration; however, when you transition into a partnership or company, the strategy shifts from “how to save on tax today” to building a sustainable and compliant tax structure for the long term. Tax Optimisation.

The business accounting team at North Advisory is well qualified to handle the technical requirements of your business taxation needs. What sets us apart is our advisory model. We work with many sole traders transitioning to partnership and company structures. Our technical capability supports our customised professional and experienced advice, ensuring clients make the most effective tax-optimised decisions now for future long-term gains.