Leaving cash in the trading company is lazy
If your business keeps stacking profits and you just let the cash sit there, you’re not playing it safe. You’re drifting.
I see this all the time. A business has a good year, maybe two. Revenue jumps, margins hold, and suddenly there’s a chunky balance in the company account. Everyone feels clever for about five minutes. Then the tax bill lands, inflation keeps chewing through idle cash, and the owners realise they’ve built a very boring pile of money that does almost nothing.
The ATO will still take its slice. If your company qualifies for the base rate, that might be 5%. If it doesn’t, it can be 30%. Either way, “we’ll just leave it there for now” is not a strategy.
The better question is simple. What job should that excess profit do next?
Sometimes the answer is debt reduction. Sometimes it’s super. Sometimes its asset purchases, investing through the right structure, or keeping dry powder for expansion. But “nothing” usually ranks last on my list.
Kill expensive debt before you chase clever ideas
This one isn’t sexy. It works anyway.
If the business carries debt with a meaningful interest rate, start there. I’d rather see a client wipe out ugly debt than chase some shiny tax move that saves less than the interest cost. Tax savings matter. Cash flow matters more.
The last time I pushed this hard, a client had roughly $420,000 in excess cash and a loan they kept calling “manageable”. We parked a big chunk against that debt instead of punting into random investments they barely understood. Over the next year, they saved just over $31,000 in interest. No drama. No fancy product brochure. Just a better result.
If you want a blunt rule, here it is. Don’t borrow at a painful rate while hoarding cash at a sleepy rate and pretending that counts as prudence. That’s not prudence. That’s expensive hesitation.
An offset account can help too, especially if you want flexibility without formally repaying the loan. You keep liquidity. You cut interest. You sleep better. Very underrated.
Super still works, even if it feels boring
A lot of owners ignore super because it feels slow. Fair enough. It also works.
If you run a profitable business and you’ve already covered working capital, super can be one of the cleanest places to move money. You may claim a deduction for eligible employer contributions, invest in a tax-favored environment, and shift part of your long-term wealth out of the trading entity. That matters. Trading entities attract risk. Super doesn’t belong in the firing line of every commercial wobble, lawsuit, or dumb expansion idea.
You do need to respect the contribution caps. Don’t freestyle that part. The ATO loves a paperwork mess almost as much as accountants hate cleaning one up.
I’ve had clients resist this because they wanted every dollar “available”. Then they hit their late forties, realize the business won’t fund retirement by magic, and wish they’d moved earlier. Funny how that happens.
Buy assets that earn money or create real deductions
I’m not a fan of buying junk in June just to chase a deduction. That trick has burned more businesses than most people admit. If the asset doesn’t help the business generate more revenue, reduce labor, or increase capacity, don’t buy it. A tax deduction on a bad purchase still leaves you poorer.
That said, useful assets can do real work. Equipment, vehicles used properly, fit-outs, software, and in some cases, commercial property can all make sense. Timing matters. Structure matters. Record-keeping definitely matters.
And if you buy property or a major plant, don’t guess the claim. Get the paperwork right. I’ve seen Melbourne business owners leave thousands on the table because nobody ordered a proper tax depreciation schedule in Melbourne when they want defensible numbers and a clean claim. Spreadsheets don’t impress the ATO. Neither does wishful thinking.
Separate the owner’s future from the business
This is where a lot of founders get weirdly emotional. They treat the business like it will solve every future problem. It won’t.
Your business can produce wealth. It should not hold all of it forever. If all your money stays trapped in the operating entity, you’re building concentration risk, not financial security. One bad year, one dispute, one industry shock, and suddenly your “wealth plan” looks like a hostage situation.
That’s why I often push owners to build assets outside the trading business over time. Maybe that means super. Maybe it means investments through a trust or a bucket company. Maybe it means paying yourself properly and investing personally. The right answer depends on profit levels, family structure, risk, and whether you enjoy paperwork, which most sane people don’t.
I’ve even had younger founders ask whether they need the same kind of strategic help they’d expect from a financial advisor for young adults Melbourne professionals might recommend. Yes, sometimes they do. Age doesn’t matter as much as behaviour. If you earn well and keep making decisions on the fly, you’ll waste years and probably a pile of money.
Structure beats product every time
People love asking where to “park” profits, as if there’s one magic account that fixes tax. There isn’t.
The real lever usually sits in the structure. Company. Trust. Bucket company. SMSF for the right client. Debt recycling on the personal side, in the right circumstances. Franking credits. Division 7A issues if you get sloppy. None of this sounds exciting at a barbecue, but this is where the serious gains live.
I’d rather spend two hours fixing the structure than twenty hours talking about generic investment options. Structure decides who pays tax, when they pay it, how profits move, and how much flexibility you keep. The product comes after that.
And don’t leave this until late June. Every year, someone turns up wanting a miracle in the final week. I can usually help, but the best moves need time. You want clean books, current numbers, and enough runway to make decisions that aren’t half panic and half caffeine.
If the business has excess profits, use them with intent. Kill bad debt. Build super. Buy useful assets. Invest outside the trading entity when the structure supports it. And for the love of your future self, stop calling idle cash a plan.
