Over the many years I worked as a tax accountant, it was a regular occurrence for me to hear a business client say: “Why is my tax bill so high? – I don’t have that money in the bank.
If you are a small business owner and have asked this question before, or you have some debt with the ATO that never seems to get down, then there are some other issues going on in your business that need addressing.
I’m sorry to burst alot of people’s bubbles out there, but paying taxes is GOOD! If you are nor paying taxes, then 1 of 2 things is happening: 1. You are not making and profits OR 2. You are cheating the system. It is plain and simple. So be glad you are making money.
Here are my top 5 tips on how to better save and plan for taxes and why you may not have that money in the bank;
- Create a 12 month budget / cashflow to determine where your money is going and plan for all costs that are likely to come up during the year. This includes owners drawings, loan repayments, GST and income tax payments. Budget for income also, based on prior years information.
- Have your accountant do some tax planning for you at least once if not twice a year so that you know how much your quarterly income tax instalments should be and the approximate GST payable is so you don’t get a big surprise at year end or even pay too much.
- Look at how much money you are taking from your business to live personally. Be honest with yourself. Can the business afford to pay you this amount? If you cannot meet your ongoing tax obligations, then it is likely the answer is NO.
- Add up the total amount of repayments you make on any business loans you have. this includes vehicles, equipment, capital financing, property etc. If this is greater than your profits, then you will have a cashflow problem and not have enough for taxes.
- Be responsible and aware of your tax obligations as a business owner in Australia. the ATO do not see ignorance as a defence when it comes to administering the law, and your accountant cannot be blamed for your mismanagement of finances.
If you would like some more help and advice on better business and financial management, why not get in touch with me today. https://hello.dubsado.com:443/public/appointment-scheduler/5c7dbcf00da39937d03feeda/schedule
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