Reducing tax

[Brian84]

Hi all,

I have a tax bill of $15k after I just done my last bas report. It seems that as soon as I have my tax close to being paid off it time for the next bas report.

Is there a way to get a head with paying the tax. Would buying an investment property allow me to get a reduction on my tax through claiming the property. I would pay more off each week but I'm paying as much as I can.

 

[MRO]

Are you talking about quarterly PAYG instalments from business income?

You just need to be more aware of the tax you are paying. As an employee my tax is deducted from my wages before i receive it.

As a business you receive your income in full and pay the ATO a quarterly amount based on an estimate from last year. The problem you have is probably based on you not allowing for tax as you earn income. A lot of people forget about the tax that hasnt been paid yet and then have this ongoing tax bill hanging over them.

Have you considered setting up a separate bank account for tax and then contributing a set percentage from your earnings each week/month?

Investments should never be based on the tax benefits all though this will factor into any return calculations.

 

[Brian84]

Thanks for your reply mro. Yes it is for my business. I used to put a side money for my tax and never used to have a problem with it until I had an emergency where I had to use that money and have been struggling ever since to try and catch up.

That is a good idea about starting another account to transfer money to each pay to,try and get back on track.

 

[Paul@PFI]

Two problems can occur with PAYG Instalments.
1. You underpay - defers a cashflow problem to a later period
2. Your overpay - Brings forward the cashflow problem.

You want to pay no more and no less then needed. The amount they ask for may be excessive or far less than needed for a variety of factors.

Its a wise idea to ensure you don't fall into either category and then ensure you have a strategy to retain the estimated funds to pay the instalments when due.

A diligent review by your accountant should address this. Obviously also a strategy to catch up if you are lagging also helps.

 

[Brian84]

Thanks for the advice Paul.

I think I will start another account to transfer a certain percentage of income so that will pay for tax, gst and catchup tax payments.