Articles & Blogs

This is the first of our series of blogs titled “Business Tips” that Pat Hoey has provided to help you improve, grow and manage your business.

Business tip #1 – Put 20-30% of your income to a second bank account for GST & Tax. 

Start putting aside GST and tax from when you start earning income, to avoid having to save for two years tax a year later (as you will be required to pay for the first year’s tax and also start paying installments for the 2^nd years tax)

GST is 10% of your income, but what you pay to the ATO can be less than this, due to claiming GST on your purchases.  So the GST to set aside could range from 5-10%, depending on your type of business and expenses you have.

The tax to set aside also depends on level of income and profits you expect to have.  If say, you are expecting $100k of profits, the tax on this is $25k.

So if income before expenses is expected to be $150k – then $25k tax on this is 16.67%.  But if income needs to be $200k to get a $100k profit, then $25k tax on this income is 12.5%.

So depending on the type of business and expenses you have, the total GST and tax to set aside when income is paid to you, can be usually between 20-30%.

By Pat Hoey