Insights · Cash flow ·
The bucket system: separate bank accounts for tax, GST and wages
Most ATO debts start the same way: GST and PAYG sit in the main account, get spent on running the business, and the BAS arrives with nothing to pay it. A few extra bank accounts fix that.
The accounts
- Operating: where customer payments land and bills are paid.
- GST: move the GST portion of every receipt here.
- PAYG withholding and super: move these each pay run. With Payday Super, super is due with each pay: Payday Super for employers.
- Income tax: a percentage of profit for PAYG instalments and the final bill: PAYG instalments.
- Buffer: build toward one to three months of fixed costs.
Make it automatic
Set a weekly transfer day. Use your bank's sub-accounts or scheduled transfers. Many owners find a weekly 10-minute routine easier than a monthly scramble.
How much?
See how much tax to set aside. If you are already behind, read ATO payment plans.
Quick answers
Should I keep GST in a separate account?
It is a simple way to make sure the GST you collect is there when your BAS is due.
How often should I transfer tax money?
Weekly works well for most small businesses.
Sources
General information only. This article does not take into account your circumstances and is not tax, legal or financial advice. Rates and rules change; check the sources above and get advice for your business before acting.
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