Yes, I know the title to this post may seem like an oxymoron. I read an article recently stating that 2% of businesses have been bankrupted by the Tax Office because of overdue tax bills. This shouldn’t be the case!
I see it alot with small businesses owing money to the tax department. Some thousands, some hundreds of thousands, and it gets me thinking sometimes, Why? I realise that cashflow is the all important thing that small business struggles with. I experience it myself, but I have the necessary strategies in place that enable me not to lose sleep over it. I have to admit it has taken a few hard lessons and seeing others learn them aswell, to actually put something in place.
If you have the capacity to borrow money to fund cashflow, such as factor finance and business loans, you need to make Tax payments part of the budget! Superannuation is another one you need to budget for incidentally.
It surprises me that so many business owners don’t put money aside for tax payment at the end of the quarter, or year when they come knocking.
Over the last few years, I’ve started two High Interest Savings accounts specifically for my tax payments. I use all the time available to me to pay the Tax Office. Don’t get me wrong, I dislike the ATO as much as anyone. The longer they can keep their grubby little hands off my money, the better.
This way, I get to earn as much interest as possible on the tax money I owe. And at the time they need the funds for payroll tax, GST, Capital gains, income tax, and whatever other tax they overzealous tax chiefs in the government can muster up, I actually have the funds to pay them!
This keeps them off my back and out of my business where they belong. You don’t need to be worrying about the Tax Office when running a business. you need to be concentrating on generating income and growing your asset!
All you need is a small amount, Eg; $1,000 for the first deposit. Then work out what your approximate tax was last year and reduce it to monthly amounts to be paid into the account by bPay or direct debit. I do it automatic transfer online each month. That way, I have all the control.
Apart from using it for the tax man, it can be used for many things such as a planned holiday, emergency fund, or just teaching your kids how to save. Set yourself a target, and then move some out into a more strategised investment such as shares or property investment.
Whatever ther reason, Australians need to start saving again, so the next time we have a recession, you will be in a much better position to take it on.
PD
