No business incurs profits the moment it is set up. There are several ups and downs that a business will experience on its way to success, which is why you should start setting aside a certain amount from the very beginning so that you are in the practice of doing so for the many years to come. Here are a few tips to help you start saving:
1. Be aware that when you earn income, you will need to pay tax (Earnings/profit of more than $20,000 will mean there is tax payable).
2. Budget and save for your tax. Generally, we suggest to clients to put aside 25-30% of all income earned. This should cover your income tax at the end of the financial year. We would also suggest that you keep these funds in a separate account to reduce the temptation of spending it.
3. Take advantage of income tax instalments – If the ATO knows from previous years that you need to pay tax, they will issue yourself as an individual, or your company, income tax instalments to pay your tax ongoingly. If we prepare your BAS, we monitor these instalments, but if manage yourself, ensure that they are for the appropriate amount and vary them as required (up or down). These instalments mean you are paying your tax ongoingly and there should be no surprise at the end of the financial year.
4. Plan! – Tax planning is crucial and you should check in with your accountant (us!) to ensure you are on track with your tax savings. We can provide an estimate of what you should have at a specific point in time, as well as strategically plan for tax minimisation (legally, of course).