A month into the new financial year is the perfect time for business owners to be consolidating their business plans, taking an overview of their operations and ensuring their budgets are on track.
Which is why, the amount of payments jammed into this month can come as a bad surprise! It’s like a repeat of the February statutory obligations bonanza and is important to keep on top of and tackle strategically.
Different bodies will view SMEs approach to these obligations with their own perspectives.
Let’s take a look!
What do you need to be aware of in August?
June Business Activity Statements (BAS) inc:
And July PAYG
These are significant payments to make. GST is 10% of your total sales, while PAYG will be 20-30% of your own and staff salaries.
A quick note on GST:
For accurate GST claims make sure you have solid business processes around expense tracking, know what you can and can’t claim and remember to keep your records for 5 years. Even as a new small business it is a good idea to consider accounting software to remove chance of manual errors. The ATO has a great reference portal here if you need any help, or of course, talk to your accountant.
How you can tackle these
There are a few common ways to approach these larger payments.
1 – Pay upfront
Banks do not like to see that your statutory obligations haven’t been paid. That means paying upfront will be the best option if you are considering applying for a business loan in the near future.
This is especially the case if you have ever been behind in your payments to the tax office.
2 – Payment plan
When cash is king, and it is difficult to secure bank funding, it can make sense to ask for a payment plan from the ATO. In fact this is a very common way of financing. However, it is important to know that the ATO can, but does not always, charge interest.
Businesses in this situation likely have tight cash flow and will benefit from a staggered approach to these payments.
This is the case with many businesses we work with and has been especially the case over the past 18 months with states in and out of pandemic related shutdowns.
What do businesses need to know?
Choosing to pay upfront or use a payment plan comes back to some business fundamentals.
As mentioned above, there is often a disconnect between what banks need to provide a loan, and what businesses want from a tax or immediate cashflow perspective.
Businesses often use accounting to reduce the tax they pay. The flip side of this is it is likely to be masking or reducing the amount of profit a business is making – a key figure when looking to secure a bank loan. The banks don’t want to lend you money if it looks like your business isn’t making any.
The factors businesses must consider comes back to their growth strategy. If you’re looking for funding you will need to showcase your strengths, even if that means paying more tax.