New FY 2025 Small Business Tax Rates

Changes in Tax Rates for FY 2025

Marginal tax rates are the rates applied to each additional dollar of income earned. In Australia, tax rates are progressive, meaning higher rates are used as income increases. Fiscal policies can lead to fluctuations in these rates, directly affecting small businesses. For FY 2025, due to increased cost of living pressures and inflation, the Australian government has agreed to reduce marginal tax rates, which in turn helps small businesses that operate as sole traders or partnerships.

Click here for a comprehensive guide to business tax in Australia

New Small Business Tax Rates for FY 2025

To help sole traders, the Australian government announced on 1 July 2024 that new marginal tax rates would be implemented. The proposed tax cuts will:

• Reduce the 19 per cent tax rate to 16 per cent.
• Reduce the 32.5 per cent tax rate to 30 per cent.
• Increase the threshold above which the 37 per cent tax rate applies from $120,000 to $135,000.
• Increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000.

Benefits for Small Business

Due to these reductions, a small business earning $100,000 a year would be $2,179 better off. This is based on your tax, under the old tax rates totalling $24,967. Under the new tax rates, you will be taxed only $22,788.

You can calculate your tax reduction here.

Strategies for Managing Marginal Tax Rates 

Navigating marginal tax rates requires proactive tax planning. Deductions, credits, and strategic financial decisions can help optimise your tax situation. Here are some strategies to consider: 

• Tax planning: Regularly review your financial situation and plan for tax liabilities. Anticipating income fluctuations and expenses can help minimise tax burdens. 
• Deductions and credits: Use available deductions and credits to lower your taxable income. This can include business expenses, retirement contributions, and healthcare costs. 
• Automated accounting solutions: Consider investing in computerised accounting software like Thriday to streamline your financial processes. Automated solutions save time and provide insights into tax optimisation opportunities. 

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Benefits of Using Thriday for Small Business Tax Management

Thriday offers comprehensive solutions tailored to the needs of small businesses. Our automated accounting platform simplifies tax management, allowing you to focus on growing your business. With Thriday, you can: 

1. Streamline tax filings: Our platform automates tax calculations and generates accurate reports, making tax season hassle-free. 
2. Maximise deductions: Thriday identifies potential deductions and ensures you're leveraging every tax-saving opportunity. 
3. Stay compliant: Keep up with changing tax regulations and compliance requirements without the headache of manual paperwork. 
4. Gain insights: Access real-time financial data and insights to make informed business decisions and optimise tax strategies. 

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Key takeaway  

Understanding marginal tax rates is essential for small business owners looking to manage their finances effectively. By staying informed about changes in tax rates and implementing strategic tax planning, you can minimise tax liabilities and maximise savings. Thriday is here to support you on your journey, offering automated accounting solutions designed to simplify tax management. Take control of your tax planning today and sign up for Thriday's services to unlock a brighter financial future for your small business.