Whether you have an established business or are looking to launch a new business venture, our team of proactive accountants work with you to not only improve your overall performance but to achieve genuine growth, all whilst adhering to current taxation laws. You’ll be able to say with absolute confidence that your business and personal tax needs are being taken care of.

To help with explaining the importance of professional tax advice, our Accounting & Tax advisors have used a real-life scenario to show what could happen.

A business starts trading in July 2021 (the 2022 tax year). As such:

  • No physical tax will be paid in the first 12 months (ignore GST and employee taxes).
  • At the end of the financial year, the business would be required to lodge a tax return.
  • The tax liability would be due in May 2023 (up to 18 months after the business initially began trading).

Although the thought of not paying any tax for a year seems like a great idea, particularly during your first year of trading when you can expect to encounter more costs than following years, there are a lot of issues with not paying tax during this first year:

  • The business will now be triggered for PAYG instalments (tax in advance for 2023) as well as having to pay the 2022 tax liability.
  • This is two years’ worth of tax payable in just 12 months.
  • In addition, if the business didn’t lodge their tax return until late 2022, say December, then they have missed two of the quarterly instalments meaning the two years’ worth of tax has to be paid over a six-month period.

The above example is typical of a business starting out and unfortunately, it is all too common for a business to lodge their first tax return late in the year, leaving very little time to find tens of thousands of dollars to cover two years’ worth of tax liability.

Here’s a few of our tips to help keep you on top:

  • Put tax money aside from day one (if you are unsure of how much, start with 25% and go up from there).
  • This money can sit in a high-interest account or against your home loan in an offset account.
  • Engage in tax planning with your accountant before the end of the year. From this, you can see if you have enough money saved or if you can implement any strategies to reduce your liability.
  • Lodge your tax return early. Your liability will still be due in May, but you have a longer time to save any shortfall.

Make sure that your business stays on the right side of the ATO.

Be proactive with your accounting by getting in touch with our Accounting & Tax experts today.

We have accounting and tax teams located all over Australia and can help you from your nearest Carbon office or virtually.