May 13, 2024 • 22 mins
Not sure what taxes you need to pay or feel like getting into tax debt is a real possibility for your small business?
With Aussie small business owners grappling with a staggering $24 billion in tax debt, this episode slices through the complexities of business tax sharing what you need to know to get on top of your compliance avoid tax debt.
Safeguard your business's financial future with tips to help you save for tax and if you're already in debt, how to dig yourself out.
This episode is brought to you by Become A Business Money Magnet - Simple habits to manage your money and supercharge your profits!
Want 30 Ways to Save Money in your Business? Download the guide here.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
You're listening to the Secrets of Successful
Business podcast, your go-tosource for business tips, tricks
and proven strategies that willhelp you create a streamlined
and profitable business.
We chat to the best minds inbusiness about their journey.
It's my business and I'll do itmy way, how they started,
rather than going harder to getmore focus on growing more with
(00:25):
what you have.
What they learned along the way.
How long are you going to givethis?
Speaker 2 (00:29):
What compromises are you going to make Just because
you can do it?
Speaker 1 (00:32):
doesn't mean that you should do it.
It's really important toremember that it's a long game
and, of course, we'll ask themfor their secret sauce for
creating a successful business.
If you're not failing, you'renot doing it right.
You should be struggling attimes.
That is part of the journey.
Join us as we take a sneak peekbehind the curtain.
Talk solutions for thosebusiness pain points, working
(00:52):
smarter, not harder, mindset andthe challenges of fitting it
all in with the demands oftoday's busy lifestyle.
If you're a business owner,side hustler or just starting
your business journey, thispodcast is for you.
Now here's your host, businesscoach and content creator,
justine McLean from FlossieCreative.
Speaker 2 (01:13):
Hello and thanks for joining me on the podcast today.
In case we haven't met, I'mJustine, a small business owner
on a mission to uncover andshare the secrets of creating
and running a profitable,sustainable and successful
business.
I've been in business for over20 years now and I get to use
all that I've learned along theway to help other women in
business reduce the overwhelm,gain visibility around their
(01:37):
numbers, charge what they'reworth and make more money.
It's about designing a life youlove that fits into your
definition of success.
So if I can help you create theprofitable business you deserve
, please reach out Now withoutfurther ado.
(01:59):
Let's dive into today's episode.
Hello and welcome to thepodcast.
Today we're talking tax, asubject that either terrifies
people or really annoys them,because who wants to pay tax?
Right?
But the reality is that payingtax is part of working and doing
business, no matter where youlive.
And if you live in Australia,as of 2021, which was the most
(02:23):
recent stat, I could find wewere ranked fourth as one of the
highest income taxed countriesin the world.
So fourth on that list.
Yeah, we certainly pay our fairshare, but, as Ben Franklin
once said, in this world nothingcan be said to be certain
except death and taxes, andain't that the truth?
(02:45):
And so, like it or not, we allneed to pay our fair share of
tax Now.
Right now, aussie businessowners Aussie small business
owners owe $24 billion yes, Isaid $24 billion, with a B in
back taxes.
This collectible debt relatesto their business activity
(03:07):
statements, or BAS as we callthem here in Australia, and
these are quarterly statementsthat we need to send into the
government, basically to tellthe government what we have
collected on their behalf ingoods and services tax and, as
pay as you go, income tax, sothat's the tax that come out of
(03:28):
our staff's wages, or even outof our own wages.
Apparently, there is more than$8 billion owing in pay as you
go income tax.
There's $8.5 billion in GST,$5.5 billion in pay-as-you-go
installments, so that's moneythat the ATO is essentially
(03:49):
asking for in advance that'sincome tax in advance and around
$1.9 billion in superannuation,and an increasing number of
businesses are continuing tofall behind on these debts.
So it's really a strugglestreet for a lot of businesses
now in Australia and look, it'sno wonder when I think about it.
(04:09):
The system is reallycomplicated.
It can often be confusing.
Just explaining the differencebetween pay-as-you-go tax and
pay-as you-go installment topeople.
You can see their eyes rollingback in their head as I do it.
But the setup in Australia forsmall business as it is now, is
that essentially, we have beengiven the fabulous job of being
(04:32):
a tax collector for thegovernment, so we need to do
that, whether we like it or not.
The trouble is that once youcollect that tax whether it's
the tax that you take out ofyour staff's wages or the tax
that you take out of your wages,or whether it's the goods and
services tax, sales tax forother countries that you will be
withholding it could be monthsbefore you actually need to pay
(04:55):
that money to the government,and so you're expected to be
really disciplined, leave itsitting in an account, keep it
separate to everything else andnot touch it.
The government expects you tobe able to do that as a small
business owner and, in principle, great idea, right.
But when cash flow is tight andyou can see that big pot of
money sitting there, it's reallytempting to spend that money
(05:18):
now, to just borrow it for amonth or a week and pay it back
later, and you'll definitelyhave that paid back by the time
that the tax liability is due.
But obviously we're just notdoing that and to me, either
people are spending the moneythat they've got saved for tax
or they're not saving it at allbecause they are not really
(05:39):
understanding that money thatthey're collecting, that portion
of money doesn't belong to them.
So for a lot of small businessesit's a bit like being stuck
between a rock and a hard place,and the interesting thing is
that historically, australianshave been great at paying their
tax on time and that was the wayit was up until the pandemic.
But the culture seemed tochange through the pandemic and
(06:03):
there could be a thousandreasons why.
But the Australian tax officehas decided that now is the time
to fix it.
Yes, in the middle of adownturn, they want to chase
that $24 billion that they'reowed from small business.
They're not happy about chasingdebt, quite obviously, and
they're not happy about chasingit at the rate that they have to
(06:26):
chase it now.
And honestly, the truth is thatif the ATO decided to get tough
on debt tomorrow and apparentlythey are there's a lot of small
businesses who are just goingto have to close their doors
because they're not going to beable to stump up the cash that
they need to pay their debts.
Now I know firsthand what it'slike to be in hot water with the
(06:47):
ATO, with the tax office, andit is not pretty.
Let me tell you when my husbandand I went into our second
business, pretty quickly weended up in $42,000 worth of tax
debt, and if you've beenlistening for a while, you would
have heard me tell this storybefore we went into a payment
arrangement for that debt.
But what that meant for us wasthat while we could pay off
(07:09):
$42,000, all of our other taxliabilities so whether that was
the money we were collecting forGST or the PAYG payments we
were paying to our staff all ofthat had to be paid on time.
There was no adding to the$42,000 debt.
Now that's changed.
Over the last few years A lotof businesses have been allowed
(07:31):
to add to their debt becausethey've almost been working in a
cash flow void because they'veused their tax for something
else.
They've gotten themselves intotrouble.
So now they're using the taxthat they're collecting today to
pay the tax from the last threemonths.
So the ATO have definitelyallowed that to happen.
They've allowed people to addto their debt and so that has
(07:54):
become a problem.
But the one thing that I knoweven when we were in that debt
and we weren't allowed to add toour debt when you're in debt,
especially to the tune ofthousands of thousands of
dollars, it's really stressfulbecause you don't have that
money handy.
If you did have that money, youwould have paid it up and you
wouldn't be in that debt.
But it's often really hard todig yourself out of such a big
(08:16):
hole.
It becomes so stressful and youreally need to be mentally
tough and have a strongresilience muscle to be able to
just keep going when you findyourself in that situation.
So because I've been in thatsituation and I know what it's
like to dig myself out of thatsituation, I have been super
careful over the years to have asystem where I never get into
(08:40):
hot water again.
And in this episode,particularly for any of those
business owners that arelistening that are in debt right
now, I thought I would sharesome of my tips and suggestions
for getting out of debt and, ifyou're not in debt, making sure
that you don't get into debt inthe first place.
So here we go.
The first one is to reallyunderstand that you are a tax
(09:04):
collector for the government.
That part of doing business,wherever you are, will mean that
you have to collect tax,whether that's GST, sales tax,
vat, whatever it is.
If your business is earningover a certain amount of money
each year, you have to add thatsales tax, that GST, that VAT,
(09:24):
to all of your products, all ofyour services.
So you are collecting that onthe government's behalf and you
need to remit that to thegovernment when they say it's
due.
Likewise, if you have staff andyou're paying staff, in
addition to paying them theirwages, part of the commitment
that you made to them when youoffered them that casual,
(09:46):
part-time, full-time role wasthat you would pay their salary
and you would also pay their taxand any superannuation
obligations as well.
That money is not yours.
That money belongs to thegovernment.
The taxes belong to your staff,essentially, but you're holding
them, you're withholding themand you're paying them to the
(10:07):
government on their behalf.
So that's the first thingunderstanding that the money
isn't yours.
And because the money isn'tyours, you need to safe, keep it
until you need to pay thosedebts.
Really understanding what taxesyou're liable for then becomes
super important.
And if you're really not sure,particularly when it comes to
(10:29):
things like qualifying for GSThere in Australia.
If you're not sure what thethreshold is at $75,000 in a
financial year, by the way thenyou need to speak to an expert
and find out exactly what you'reliable for.
So all of the different taxesthat you're liable for and
depending on what sort ofbusiness structure you have,
(10:51):
that will make a difference.
And then make sure you'reregistered for all of those
taxes and make a note of the duedates that all the compliance
is due for those particulartaxes, because that's really
important.
Even if you have a bookkeeperor a BAS agent or an accountant
that are going to be processingthose things on your behalf,
it's important that you don'tabdicate that responsibility
(11:13):
completely, that you make a noteof what your compliance
obligations are and the datesthat things are due.
My next tip is to make sure thatthings are lodged on time.
So whether that's your taxreturn, whether that's your
business activity statement, nomatter what it is, lodge on time
because you don't want to get asilly fine because you're late.
(11:34):
If you're working with aprofessional, they tend to have
extensions, extra time toprocess and therefore you have
extra time to pay.
Bas agents, for example, havean extra month to lodge, and so
you get an extra month to payyour debt.
So that can be quite useful andcertainly worth the money that
you're paying them.
(11:54):
And then, of course, youraccountant will have extra time
to lodge your tax return so theycan opt into a late lodgement
program.
But if you're lodging yourself,make sure you lodge on time,
because those dates are set instone.
The next thing to do is to setup a separate account, and that
account is just for your taxes,and you need to get really
(12:15):
serious about putting your taxobligations aside.
So if you are subject to GST,if you're a GST registered
business same as if you'reregistered for sales tax or VAT
put aside the money that youcollect every single week.
Now I am a GST registeredbusiness, so at the end of each
(12:36):
week actually on a money MondayI retrospectively look back over
the last week and I take 10% ofall of the money that I've
earned and I shove it into mytax account.
Obviously, I am saving too much, but that is just going to be a
bonus for me at some point downthe track.
The other thing that you shoulddo is if you are paying wages
(12:57):
whether they're wages for thestaff or for yourself, just like
if you were the payroll officerfor a big organization.
You need that money, that moneythat is owing for the tax and
the superannuation, and you needto put that into your tax
account as well.
So act as if you're just payinganother wage or another
supplier.
(13:18):
If you don't have staff but youneed to pay tax for yourself,
you're a solopreneur and youdon't know what your tax
liability is going to be untilthe end of the financial year,
for example, when your taxreturn goes in.
So that you're not looking downthe barrel of having a massive
debt to pay, the best thing todo is to look at last year's
return, divide that by 52 andsave that number each week so
(13:42):
that you've always got somemoney that's going away for your
tax.
If you are a company here inAustralia, you need to look at
your profit number and know that25% of that profit essentially
belongs to the government, sothat's just on face value.
Obviously, your accountant willdo some magic, and so it
probably won't be technicallythat 25%, but put that away just
(14:04):
in case.
Now, if you're paying off a taxdebt, if you already have a tax
debt, you really need toallocate that portion of money
too and that's super importantto just keep paying.
Remember that when you have adebt, interest is accruing on
that debt, so you don't wantmore interest to accrue than is
necessary.
Really important to keep payingit off regularly.
(14:26):
My tip there is to set up adirect debit, because if you
don't and you default on yourpayment arrangement, it will
result in the paymentarrangement being stopped.
Automate your transfers whereyou can.
I know that's not always easy.
Certainly that wouldn't be aneasy thing to do in my business,
where the money ebbs and flows.
But if you've got a lot of cashflows sitting in your operating
(14:46):
account, it could be an easyway to make sure that you've
always got money going away intoyour tax account.
Of course, when saving for tax,you don't need to go into as
much detail as I mentionedpreviously.
You can simply estimate anamount that you want to put away
each week.
So you could do that as ageneral percentage of your
turnover 15 to 20% and you couldjust save that each and every
(15:10):
week.
But the bottom line here is tobe consistent.
Now, it goes without sayingthat none of us want to pay more
tax than we need to, whetherit's business tax or whether
it's personal tax.
So my advice is to know what youcan and cannot claim as a
deduction upfront.
The best way to know what youcan and cannot claim as a
deduction upfront, the best wayto know what you can and can't
claim is to speak to aprofessional, especially as you
(15:33):
get near to the end of financialyear or as you enter a new
financial year, it's a greatidea to have a tax plan in place
for your business so that youknow exactly what it is you are
aiming to earn and what you needto save, and what you can claim
and what you can't claim as taxdeductions.
The best way to keep track ofeverything, of course, is to
(15:55):
keep great records, and, in myopinion, the best way to do that
is to use a cloud accountingsystem, rather than running
around and collecting all ofthose receipts at the end of the
financial year and working outwhat's deductible and what isn't
.
If you have a cloud accountingsystem, it can all go into one
place and it's as simple asinviting your tax professional
(16:16):
in or running a few reports ifyou're doing your taxes yourself
, and all of the information isthere.
So it's definitely a greatinvestment in your business.
My last bit of advice when itcomes to paying taxes and
whether this applies whetheryou're in debt or not is don't
suffer in silence.
If you're not sure or if youare in trouble, don't put your
(16:39):
head in the sand.
Ask for help, speak to aprofessional or go to the ATO
directly.
I was literally talking tosomeone this week who was
sharing a story about how theywere in a position where they
hadn't put tax in for years andas each year went past, they
became more and more afraid ofputting their tax in because
(17:03):
they were worried about what theresult would be, what the
outcome would be.
People think that their localtax office are really out to get
them, but I can absolutelyassure you through years and
years of dealing with thewonderful people that work there
.
They're there to help.
They genuinely don't want youto be in debt, but if you are in
(17:23):
debt, then they are genuinelygoing to try and help you get
out of that debt, to come tosome sort of resolution.
Of course, if you don't want tocontact the local tax office
yourself, you can always speakto your accountant or your BAS
agent to speak to the local taxoffice on your behalf and work
out a payment plan to help youafford to pay off your debt.
(17:47):
I think one of the big thingsthat I see with business owners
who are in debt is that oncethey take that step, once they
make the decision to ask for apayment plan, they become very
unrealistic about how quicklythey're going to be able to pay
it off.
I suppose the reason for thatis that they're concerned about
any interest that will it off.
I suppose the reason for thatis that they're concerned about
any interest that will be addedto their debt.
(18:09):
And the truth is the tax officehere in Australia will add
interest to that debt as you go.
But nine times out of 10, whenyou make the final payment on
your outstanding debt and youask for the interest to be
refunded, they will actuallyrefund that interest to you.
(18:29):
So again, they're nice people.
They're there to help you.
They're not trying to cane youand keep all that money in their
coppers.
They're more than happy to payit back to you.
In most cases, they're justusing it as an incentive to keep
you paying to your repaymentschedule.
Definitely, make sure thatyou're realistic about what you
(18:51):
can afford when you go to set upa repayment schedule, because
the last thing you want to bedoing is putting yourself under
more pressure.
As I said earlier, you'vereally got to stick to that
payment schedule once you agree,because if you default on that
payment schedule, they'll justcancel it.
So if something happens and you, for whatever reason, you can't
(19:11):
afford to pay your weekly oryour fortnightly debt payment,
get on the phone, call the ATOin advance and set up a new
arrangement or explain to themthat you're not going to be able
to pay, and they can reassessthat arrangement for you.
If you are a late lodger, ifyou haven't lodged your tax in a
while, or you're overdue withan activity statement, there
(19:35):
definitely could be penaltiesthat are attached and in most
cases, those penalties that'sjust like any other fine it's
money that you lose.
But again, like any other fine,it's money that you lose.
But again, in my experience,the ATO can be very lenient
about those penalties.
So just make sure that youcommunicate.
That's the biggest tip that Ican give you right here.
I think we know that paying taxis inevitable and, as I said
(20:00):
right at the start, so many ofus live in fear of paying tax.
But if you want to think aboutit in a really positive way.
When you have to pay tax, itmeans that your business is
making money, and that's a goodthing.
So, while I'm not suggestingthat you pay more than you
should, that's where your taxplan with your accountant comes
in, by the way, something thatyou set up at the end of the
financial year or new financialyear.
(20:22):
When it comes to taxes and allof the other business money
stuff, the best way to get aheadand to make more money in your
business is to get educated,stay abreast of those changes
and, of course, if somethinghappens and you're not sure,
always get professional help.
Okay, that's it for taxes andfor paying off tax debt.
(20:44):
I hope this episode has helpedyou either set up a plan to save
for your tax or especiallyhelped you if you're trying to
pay off a tax debt.
And, of course, if you needhelp, you can reach out to me.
I offer in-person one-to-onesessions, virtual sessions as
well, group workshops, and then,of course, there's my business
money magnet program and my bookof the same name, which is out
(21:06):
very soon.
Here's to your success Untilnext time.
Speaker 1 (21:12):
Thanks for listening to the Secrets of Successful
Business podcast.
For more information on allthings business, head to
flossycomau and make sure youhit subscribe on the show so you
don't miss another new episode.
If you're enjoying the show,please give it a quick rating or
review, share it on yoursocials or with friends who
might enjoy it.
(21:32):
Catch you next time.
You're listening to the Secrets of Successful
Business podcast, your go-tosource for business tips, tricks
and proven strategies that willhelp you create a streamlined
and profitable business.
We chat to the best minds inbusiness about their journey.
It's my business and I'll do itmy way, how they started,
rather than going harder to getmore focus on growing more with
(00:25):
what you have.
What they learned along the way.
How long are you going to givethis?
Speaker 2 (00:29):
What compromises are you going to make Just because
you can do it?
Speaker 1 (00:32):
doesn't mean that you should do it.
It's really important toremember that it's a long game
and, of course, we'll ask themfor their secret sauce for
creating a successful business.
If you're not failing, you'renot doing it right.
You should be struggling attimes.
That is part of the journey.
Join us as we take a sneak peekbehind the curtain.
Talk solutions for thosebusiness pain points, working
(00:52):
smarter, not harder, mindset andthe challenges of fitting it
all in with the demands oftoday's busy lifestyle.
If you're a business owner,side hustler or just starting
your business journey, thispodcast is for you.
Now here's your host, businesscoach and content creator,
justine McLean from FlossieCreative.
Speaker 2 (01:13):
Hello and thanks for joining me on the podcast today.
In case we haven't met, I'mJustine, a small business owner
on a mission to uncover andshare the secrets of creating
and running a profitable,sustainable and successful
business.
I've been in business for over20 years now and I get to use
all that I've learned along theway to help other women in
business reduce the overwhelm,gain visibility around their
(01:37):
numbers, charge what they'reworth and make more money.
It's about designing a life youlove that fits into your
definition of success.
So if I can help you create theprofitable business you deserve
, please reach out Now withoutfurther ado.
(01:59):
Let's dive into today's episode.
Hello and welcome to thepodcast.
Today we're talking tax, asubject that either terrifies
people or really annoys them,because who wants to pay tax?
Right?
But the reality is that payingtax is part of working and doing
business, no matter where youlive.
And if you live in Australia,as of 2021, which was the most
(02:23):
recent stat, I could find wewere ranked fourth as one of the
highest income taxed countriesin the world.
So fourth on that list.
Yeah, we certainly pay our fairshare, but, as Ben Franklin
once said, in this world nothingcan be said to be certain
except death and taxes, andain't that the truth?
(02:45):
And so, like it or not, we allneed to pay our fair share of
tax Now.
Right now, aussie businessowners Aussie small business
owners owe $24 billion yes, Isaid $24 billion, with a B in
back taxes.
This collectible debt relatesto their business activity
(03:07):
statements, or BAS as we callthem here in Australia, and
these are quarterly statementsthat we need to send into the
government, basically to tellthe government what we have
collected on their behalf ingoods and services tax and, as
pay as you go, income tax, sothat's the tax that come out of
(03:28):
our staff's wages, or even outof our own wages.
Apparently, there is more than$8 billion owing in pay as you
go income tax.
There's $8.5 billion in GST,$5.5 billion in pay-as-you-go
installments, so that's moneythat the ATO is essentially
(03:49):
asking for in advance that'sincome tax in advance and around
$1.9 billion in superannuation,and an increasing number of
businesses are continuing tofall behind on these debts.
So it's really a strugglestreet for a lot of businesses
now in Australia and look, it'sno wonder when I think about it.
(04:09):
The system is reallycomplicated.
It can often be confusing.
Just explaining the differencebetween pay-as-you-go tax and
pay-as you-go installment topeople.
You can see their eyes rollingback in their head as I do it.
But the setup in Australia forsmall business as it is now, is
that essentially, we have beengiven the fabulous job of being
(04:32):
a tax collector for thegovernment, so we need to do
that, whether we like it or not.
The trouble is that once youcollect that tax whether it's
the tax that you take out ofyour staff's wages or the tax
that you take out of your wages,or whether it's the goods and
services tax, sales tax forother countries that you will be
withholding it could be monthsbefore you actually need to pay
(04:55):
that money to the government,and so you're expected to be
really disciplined, leave itsitting in an account, keep it
separate to everything else andnot touch it.
The government expects you tobe able to do that as a small
business owner and, in principle, great idea, right.
But when cash flow is tight andyou can see that big pot of
money sitting there, it's reallytempting to spend that money
(05:18):
now, to just borrow it for amonth or a week and pay it back
later, and you'll definitelyhave that paid back by the time
that the tax liability is due.
But obviously we're just notdoing that and to me, either
people are spending the moneythat they've got saved for tax
or they're not saving it at allbecause they are not really
(05:39):
understanding that money thatthey're collecting, that portion
of money doesn't belong to them.
So for a lot of small businessesit's a bit like being stuck
between a rock and a hard place,and the interesting thing is
that historically, australianshave been great at paying their
tax on time and that was the wayit was up until the pandemic.
But the culture seemed tochange through the pandemic and
(06:03):
there could be a thousandreasons why.
But the Australian tax officehas decided that now is the time
to fix it.
Yes, in the middle of adownturn, they want to chase
that $24 billion that they'reowed from small business.
They're not happy about chasingdebt, quite obviously, and
they're not happy about chasingit at the rate that they have to
(06:26):
chase it now.
And honestly, the truth is thatif the ATO decided to get tough
on debt tomorrow and apparentlythey are there's a lot of small
businesses who are just goingto have to close their doors
because they're not going to beable to stump up the cash that
they need to pay their debts.
Now I know firsthand what it'slike to be in hot water with the
(06:47):
ATO, with the tax office, andit is not pretty.
Let me tell you when my husbandand I went into our second
business, pretty quickly weended up in $42,000 worth of tax
debt, and if you've beenlistening for a while, you would
have heard me tell this storybefore we went into a payment
arrangement for that debt.
But what that meant for us wasthat while we could pay off
(07:09):
$42,000, all of our other taxliabilities so whether that was
the money we were collecting forGST or the PAYG payments we
were paying to our staff all ofthat had to be paid on time.
There was no adding to the$42,000 debt.
Now that's changed.
Over the last few years A lotof businesses have been allowed
(07:31):
to add to their debt becausethey've almost been working in a
cash flow void because they'veused their tax for something
else.
They've gotten themselves intotrouble.
So now they're using the taxthat they're collecting today to
pay the tax from the last threemonths.
So the ATO have definitelyallowed that to happen.
They've allowed people to addto their debt and so that has
(07:54):
become a problem.
But the one thing that I knoweven when we were in that debt
and we weren't allowed to add toour debt when you're in debt,
especially to the tune ofthousands of thousands of
dollars, it's really stressfulbecause you don't have that
money handy.
If you did have that money, youwould have paid it up and you
wouldn't be in that debt.
But it's often really hard todig yourself out of such a big
(08:16):
hole.
It becomes so stressful and youreally need to be mentally
tough and have a strongresilience muscle to be able to
just keep going when you findyourself in that situation.
So because I've been in thatsituation and I know what it's
like to dig myself out of thatsituation, I have been super
careful over the years to have asystem where I never get into
(08:40):
hot water again.
And in this episode,particularly for any of those
business owners that arelistening that are in debt right
now, I thought I would sharesome of my tips and suggestions
for getting out of debt and, ifyou're not in debt, making sure
that you don't get into debt inthe first place.
So here we go.
The first one is to reallyunderstand that you are a tax
(09:04):
collector for the government.
That part of doing business,wherever you are, will mean that
you have to collect tax,whether that's GST, sales tax,
vat, whatever it is.
If your business is earningover a certain amount of money
each year, you have to add thatsales tax, that GST, that VAT,
(09:24):
to all of your products, all ofyour services.
So you are collecting that onthe government's behalf and you
need to remit that to thegovernment when they say it's
due.
Likewise, if you have staff andyou're paying staff, in
addition to paying them theirwages, part of the commitment
that you made to them when youoffered them that casual,
(09:46):
part-time, full-time role wasthat you would pay their salary
and you would also pay their taxand any superannuation
obligations as well.
That money is not yours.
That money belongs to thegovernment.
The taxes belong to your staff,essentially, but you're holding
them, you're withholding themand you're paying them to the
(10:07):
government on their behalf.
So that's the first thingunderstanding that the money
isn't yours.
And because the money isn'tyours, you need to safe, keep it
until you need to pay thosedebts.
Really understanding what taxesyou're liable for then becomes
super important.
And if you're really not sure,particularly when it comes to
(10:29):
things like qualifying for GSThere in Australia.
If you're not sure what thethreshold is at $75,000 in a
financial year, by the way thenyou need to speak to an expert
and find out exactly what you'reliable for.
So all of the different taxesthat you're liable for and
depending on what sort ofbusiness structure you have,
(10:51):
that will make a difference.
And then make sure you'reregistered for all of those
taxes and make a note of the duedates that all the compliance
is due for those particulartaxes, because that's really
important.
Even if you have a bookkeeperor a BAS agent or an accountant
that are going to be processingthose things on your behalf,
it's important that you don'tabdicate that responsibility
(11:13):
completely, that you make a noteof what your compliance
obligations are and the datesthat things are due.
My next tip is to make sure thatthings are lodged on time.
So whether that's your taxreturn, whether that's your
business activity statement, nomatter what it is, lodge on time
because you don't want to get asilly fine because you're late.
(11:34):
If you're working with aprofessional, they tend to have
extensions, extra time toprocess and therefore you have
extra time to pay.
Bas agents, for example, havean extra month to lodge, and so
you get an extra month to payyour debt.
So that can be quite useful andcertainly worth the money that
you're paying them.
(11:54):
And then, of course, youraccountant will have extra time
to lodge your tax return so theycan opt into a late lodgement
program.
But if you're lodging yourself,make sure you lodge on time,
because those dates are set instone.
The next thing to do is to setup a separate account, and that
account is just for your taxes,and you need to get really
(12:15):
serious about putting your taxobligations aside.
So if you are subject to GST,if you're a GST registered
business same as if you'reregistered for sales tax or VAT
put aside the money that youcollect every single week.
Now I am a GST registeredbusiness, so at the end of each
(12:36):
week actually on a money MondayI retrospectively look back over
the last week and I take 10% ofall of the money that I've
earned and I shove it into mytax account.
Obviously, I am saving too much, but that is just going to be a
bonus for me at some point downthe track.
The other thing that you shoulddo is if you are paying wages
(12:57):
whether they're wages for thestaff or for yourself, just like
if you were the payroll officerfor a big organization.
You need that money, that moneythat is owing for the tax and
the superannuation, and you needto put that into your tax
account as well.
So act as if you're just payinganother wage or another
supplier.
(13:18):
If you don't have staff but youneed to pay tax for yourself,
you're a solopreneur and youdon't know what your tax
liability is going to be untilthe end of the financial year,
for example, when your taxreturn goes in.
So that you're not looking downthe barrel of having a massive
debt to pay, the best thing todo is to look at last year's
return, divide that by 52 andsave that number each week so
(13:42):
that you've always got somemoney that's going away for your
tax.
If you are a company here inAustralia, you need to look at
your profit number and know that25% of that profit essentially
belongs to the government, sothat's just on face value.
Obviously, your accountant willdo some magic, and so it
probably won't be technicallythat 25%, but put that away just
(14:04):
in case.
Now, if you're paying off a taxdebt, if you already have a tax
debt, you really need toallocate that portion of money
too and that's super importantto just keep paying.
Remember that when you have adebt, interest is accruing on
that debt, so you don't wantmore interest to accrue than is
necessary.
Really important to keep payingit off regularly.
(14:26):
My tip there is to set up adirect debit, because if you
don't and you default on yourpayment arrangement, it will
result in the paymentarrangement being stopped.
Automate your transfers whereyou can.
I know that's not always easy.
Certainly that wouldn't be aneasy thing to do in my business,
where the money ebbs and flows.
But if you've got a lot of cashflows sitting in your operating
(14:46):
account, it could be an easyway to make sure that you've
always got money going away intoyour tax account.
Of course, when saving for tax,you don't need to go into as
much detail as I mentionedpreviously.
You can simply estimate anamount that you want to put away
each week.
So you could do that as ageneral percentage of your
turnover 15 to 20% and you couldjust save that each and every
(15:10):
week.
But the bottom line here is tobe consistent.
Now, it goes without sayingthat none of us want to pay more
tax than we need to, whetherit's business tax or whether
it's personal tax.
So my advice is to know what youcan and cannot claim as a
deduction upfront.
The best way to know what youcan and cannot claim as a
deduction upfront, the best wayto know what you can and can't
claim is to speak to aprofessional, especially as you
(15:33):
get near to the end of financialyear or as you enter a new
financial year, it's a greatidea to have a tax plan in place
for your business so that youknow exactly what it is you are
aiming to earn and what you needto save, and what you can claim
and what you can't claim as taxdeductions.
The best way to keep track ofeverything, of course, is to
(15:55):
keep great records, and, in myopinion, the best way to do that
is to use a cloud accountingsystem, rather than running
around and collecting all ofthose receipts at the end of the
financial year and working outwhat's deductible and what isn't
.
If you have a cloud accountingsystem, it can all go into one
place and it's as simple asinviting your tax professional
(16:16):
in or running a few reports ifyou're doing your taxes yourself
, and all of the information isthere.
So it's definitely a greatinvestment in your business.
My last bit of advice when itcomes to paying taxes and
whether this applies whetheryou're in debt or not is don't
suffer in silence.
If you're not sure or if youare in trouble, don't put your
(16:39):
head in the sand.
Ask for help, speak to aprofessional or go to the ATO
directly.
I was literally talking tosomeone this week who was
sharing a story about how theywere in a position where they
hadn't put tax in for years andas each year went past, they
became more and more afraid ofputting their tax in because
(17:03):
they were worried about what theresult would be, what the
outcome would be.
People think that their localtax office are really out to get
them, but I can absolutelyassure you through years and
years of dealing with thewonderful people that work there
.
They're there to help.
They genuinely don't want youto be in debt, but if you are in
(17:23):
debt, then they are genuinelygoing to try and help you get
out of that debt, to come tosome sort of resolution.
Of course, if you don't want tocontact the local tax office
yourself, you can always speakto your accountant or your BAS
agent to speak to the local taxoffice on your behalf and work
out a payment plan to help youafford to pay off your debt.
(17:47):
I think one of the big thingsthat I see with business owners
who are in debt is that oncethey take that step, once they
make the decision to ask for apayment plan, they become very
unrealistic about how quicklythey're going to be able to pay
it off.
I suppose the reason for thatis that they're concerned about
any interest that will it off.
I suppose the reason for thatis that they're concerned about
any interest that will be addedto their debt.
(18:09):
And the truth is the tax officehere in Australia will add
interest to that debt as you go.
But nine times out of 10, whenyou make the final payment on
your outstanding debt and youask for the interest to be
refunded, they will actuallyrefund that interest to you.
(18:29):
So again, they're nice people.
They're there to help you.
They're not trying to cane youand keep all that money in their
coppers.
They're more than happy to payit back to you.
In most cases, they're justusing it as an incentive to keep
you paying to your repaymentschedule.
Definitely, make sure thatyou're realistic about what you
(18:51):
can afford when you go to set upa repayment schedule, because
the last thing you want to bedoing is putting yourself under
more pressure.
As I said earlier, you'vereally got to stick to that
payment schedule once you agree,because if you default on that
payment schedule, they'll justcancel it.
So if something happens and you, for whatever reason, you can't
(19:11):
afford to pay your weekly oryour fortnightly debt payment,
get on the phone, call the ATOin advance and set up a new
arrangement or explain to themthat you're not going to be able
to pay, and they can reassessthat arrangement for you.
If you are a late lodger, ifyou haven't lodged your tax in a
while, or you're overdue withan activity statement, there
(19:35):
definitely could be penaltiesthat are attached and in most
cases, those penalties that'sjust like any other fine it's
money that you lose.
But again, like any other fine,it's money that you lose.
But again, in my experience,the ATO can be very lenient
about those penalties.
So just make sure that youcommunicate.
That's the biggest tip that Ican give you right here.
I think we know that paying taxis inevitable and, as I said
(20:00):
right at the start, so many ofus live in fear of paying tax.
But if you want to think aboutit in a really positive way.
When you have to pay tax, itmeans that your business is
making money, and that's a goodthing.
So, while I'm not suggestingthat you pay more than you
should, that's where your taxplan with your accountant comes
in, by the way, something thatyou set up at the end of the
financial year or new financialyear.
(20:22):
When it comes to taxes and allof the other business money
stuff, the best way to get aheadand to make more money in your
business is to get educated,stay abreast of those changes
and, of course, if somethinghappens and you're not sure,
always get professional help.
Okay, that's it for taxes andfor paying off tax debt.
(20:44):
I hope this episode has helpedyou either set up a plan to save
for your tax or especiallyhelped you if you're trying to
pay off a tax debt.
And, of course, if you needhelp, you can reach out to me.
I offer in-person one-to-onesessions, virtual sessions as
well, group workshops, and then,of course, there's my business
money magnet program and my bookof the same name, which is out
(21:06):
very soon.
Here's to your success Untilnext time.
Speaker 1 (21:12):
Thanks for listening to the Secrets of Successful
Business podcast.
For more information on allthings business, head to
flossycomau and make sure youhit subscribe on the show so you
don't miss another new episode.
If you're enjoying the show,please give it a quick rating or
review, share it on yoursocials or with friends who
might enjoy it.
(21:32):
Catch you next time.
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