Business

How to beat tax debt with cashflow

©iStockphoto/Alonzo Adams

CURRENT reports from the ATO suggest two things are happening: they are getting tougher on people who have not paid their tax debts, and they now have the right to hold onto the refunds of businesses for no particular reason.

You've gotta love them!

If you have a tax liability that has been outstanding for many months, you can expect to receive increasing interest from the ATO debt collectors, unless you have a payment arrangement (and stick to it!).

For people who religiously pay their fair share of tax, the idea of the Tax Department getting serious about collecting outstanding debts will probably be met with applause.

Having dealt with many small businesses over the years, I have been able to view this issue from both sides of the fence.

It is amazing the situations that people can get into (through no fault of their own) and find themselves short of cash.

Sickness, divorce and death of family members can all conspire to derail the finances of any business owner, and on the flip side, so does unexpected growth in the business.

However, in most situations, the problem is simply a failure to effectively manage the business's cashflow.

And unfortunately, to meet your tax obligations, cash is a very necessary thing.

Here's a quick list of do's and don'ts:

1. Don't buy a boat.
I have seen many situations where a business owner has used business cash to purchase a boat (or a jet ski, jet boat, motorbike, and so on…), thinking that there was an unending supply of cash.

This is rarely true, and judgement day arrives far too soon, leaving you with a depreciating asset and cranky creditors.

2. Do keep good records.
If you are a regular reader of my column, you will recognise this as a recurring theme - but it really is so important!

Without good records, you will be operating your business by looking at the bank balance, and this is notoriously unreliable.

You need to know the profit of your business at any time, and how much of the bank account balance really belongs to you.

3. Do plan.
Again, a recurring theme! We all know that unexpected events will happen, and by their nature, cannot be built into any cashflow budget or business plan. However, if you have planned for the expected results, and allowed for some contingencies, you'll be in a far better place to cope with the unexpected. You might not be the world's best planner to start off with…but practice improves performance.

 

Following these tips will help you maintain a healthy cashflow, which ultimately will reduce your stress levels!

If you find that you are struggling with tax debt, there are many options available to help you.

Talking to your accountant is absolutely the first step - and don't delay, the ATO's interest rates are exorbitant! 

Topics:  ato, business, opinion, tax, tax refund


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

ELECTION 2016: Richmond candidates address affordable housing and negative gearing.

AFFORDABLE: Are places like the Kollective in Sunrise the answer for affordable medium density housing.

Will negative gearing changes produce more affordable housing

Build a fence around Byron and charge admission, says mayor

It might be the only way this tourist town can get grant funding

Is it ice cream? Is it poo? It’s Splendour art

In 2015 we learned that the infamous 'poo emoji' is actually an image of ice cream, so Mr Poopie will be a fitting Splendour homage to such a first world problem.

A fitting homage to the king of emojis

Latest deals and offers

Take a look at the draft plan for Byron’s coast

THE Draft Coastal Zone Management Plan for the Byron Bay Embayment is on public exhibition until Tuesday June 14.

ELECTION 2016: Richmond candidates address affordable housing and negative gearing.

AFFORDABLE: Are places like the Kollective in Sunrise the answer for affordable medium density housing.

Will negative gearing changes produce more affordable housing

Build a fence around Byron and charge admission, says mayor

It might be the only way this tourist town can get grant funding

Is it ice cream? Is it poo? It’s Splendour art

In 2015 we learned that the infamous 'poo emoji' is actually an image of ice cream, so Mr Poopie will be a fitting Splendour homage to such a first world problem.

A fitting homage to the king of emojis

LETTER: Gold Coastification of Byron Bay

ROCKING BELONGIL: Members of Byron Residents Group, Andrew Murray, Kate Coorey and Dialan Pugh at last year’s Save Our Beaches rally. Photo: Lyn McCarthy

Local community group urges locals to act over Byron development.

Searching for meaning in Byron Bay with Hugh Mackay

BYRON WRITERS FESTIVAL: Author and social researcher Hugh Mackay

Social researcher Hugh Mackay will talk next Wednesday in Byron.

Failed funding bid won’t stop the show at NORPA

HIT: NORPA's 2015 production of Railway Wonderland.

No NORPA shows affected after funding rejected by Australia Council.

Perfect time to invest in Northern Rivers property

The Northern Rivers rental market is tighter than Sydney making it the perfect time for investors to get better returns out of property than superannuation or banks deposits.

Low interest rates and tight rental market are prime time to invest