Knowing How Much Tax to Pay and When it is Due

Being aware of how much tax and when it will become due can enable a business to stay within its credit limits and hence not be penalised and in some cases utilise excess cash to earn additional interest income. On this basis any cash flow forecasting should include taxes in their many different forms so that any surpluses of cash or additional imposts on the business from tax can be planned for (together with all other activity).

Examples of cash flow and timing issues could be:

I

Buying a Property

You buy a property with GST included in it of $35,000 on 1st April. A decision needs to be made as to how to register for GST i.e. Monthly or Quarterly. In this case you would register on a monthly basis to enable a refund of the $35,000 as soon as 30 April arrives, as otherwise you will need to wait until 30 June.

I

Selling a Property

You sell a property in January and make a $100,000 Capital Gain, with the tax on this calculated by your accountant to be $25,000. The capital gain is included in your income tax return for the June of that same year. However by lodging your Income Tax Return with an accountant the $25,000 could be due for payment in the June of the following year. You are able to utilise the $25,000 and earn additional income thereon in the meantime.

I

Increased Sales

You are lodging your BAS’s every Quarter on an accruals basis i.e. based on invoice date not on cash flow. Your sales increased dramatically in this current quarter but due to circumstances beyond your control a lot of the income is still uncollected. As you are lodging your BAS on an accruals basis you are still required to remit the GST in all of these sales despite the lack of collection of the sales. Given all the other commitments the business has, this impost may cause cash flow issues that will need to be navigated.

I

Increased Profit

It is first year of business and the business has performed well making a profit of $100,000. As the business has some debt from the initial purchase of assets there would be an inclination to pay as much as possible off this debt. However around $30,000 will need to be paid in tax, and hence some of the profit derived should be set aside for this commitment.

At Bentleys we involve ourselves in your business so that planning for taxes can be undertaken so that the timing of same can be managed to your best advantage.

Out tax planning is also designed to enable you to take advantage of whatever the current legislation can provide you, so that your taxation costs are minimised.