Why Tradies Must Avoid The ‘Low Tax Trap’

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Just about everyone hates paying taxes.

In fact, it’s practically a national sport!

And when it comes to business, too often people use taxes as their excuse for bad performance, saying things like...

“I made money, but then I had to pay it all in taxes”.

Even if they are doing well, some trade business owners will still do anything to avoid having to pay money to the ATO…

Even if it hurts their business.

But this is a common trap that should be avoided at all costs!

There is never a case that the entire next dollar of profit goes to taxes.

The company tax rate is currently 25% in AUS, so you keep 75% cents on every dollar, which is a lot better than nothing.

And the thing is… taxes are just a part of life.

If you’re not paying taxes, there are only two possibilities:

You didn’t make any income or you’re cheating.

So, paying taxes is actually a GOOD thing.

The higher your tax bill, the better your business is doing.

This is your number one key performance indicator.

How big of a check did you write to the ATO this year?

Because you can’t create legitimate wealth from an operating business unless you pay taxes.

If your accountant is doing their job, they should be able to show you how much more money you made even though you paid taxes.

You can pay $1 million in taxes but still keep $3 million

And while a million-dollar tax bill is no fun, what matters most is the lens you see it through.

Paying $1 million to be able to KEEP $3 million, as opposed to paying less tax but having nothing to show for yourself after the day is done…

Paying the tax allows you to be able to create true wealth that could be traced to real money in the bank.

So, a word of warning…

Beware of accountants who promise to lower your tax bill to 10% or less.

They’re using the effective tax rate as a lure to have you spend all your profits to lower the amount of tax you owe the ATO.

The effective tax rate refers to the amount of tax you paid divided by your total income before deductions.

But accountants who explain taxes this way are often just luring you into spending money on deductions as a way to lower your tax bill.

And while yes, you will pay less in taxes…

You will also never build any wealth.

Which is probably different from what you’re used to hearing from most accountants because they’re often just ‘tax filers’ who simply focus on telling you how to save on taxes

NOT creating financial freedom through legitimate wealth.

Because my question to you is if I’m saving you taxes because you spend all your profit, am I really saving you anything?

Don’t focus so hard on not paying taxes…

This is holding you back.

Focus instead on the opposite end of the equation: increasing your profits.

If you're an electrician, plumber, painter, carpenter, or any other tradie business owner turning more than $1M a year looking for assistance with your tax, accounting, bookkeeping, and business advisory - click here to learn more!


Bayley Peachey | Client Advisor

About the author

As an accountant with a background in construction Bayley has advised trade businesses anywhere from start-up to $20M, helping to simplify financial management, increase business KPIs and generate millions of dollars’ worth of additional profit.

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