Almost every small business cash crisis we see has the same shape: the money was earned, the money was spent, and then the BAS or the income tax bill arrived. The fix is boring and it works.
The habit
Open a separate business savings account and call it something honest, like Tax, Not Ours. Every time you get paid, or every time you run payroll, transfer a fixed percentage into it before anything else moves.
How much to put aside
- GST: if you are registered, roughly 1/11th of your gross sales belongs to the ATO already.
- PAYG withholding: whatever you withheld from wages is never your money. Move it the day you run payroll.
- Income tax: a rough starting point for a profitable business is 20 to 30 per cent of profit. Your accountant can tighten this number for your structure and margins.
Why it works
The ATO reports that unpaid small business tax debt has climbed past $50 billion, and most of it started as a BAS someone could not pay on time. A business that skims tax off every deposit never has to find a lump sum, because the lump sum built itself.
Set the transfer up as an automatic rule in your banking app if you can. If the money never sits in your trading account, you will never accidentally spend it.