How to keep your tax dollars safe and avoid a panic

How to keep your tax dollars safe and avoid a panic

What is the biggest bill you get every year? I’ll give you a clue: It’s not invoiced.

It’s a question most business owners struggle to answer but, actually, the answer should be obvious: it’s your tax bill.

Are you ready for it? July 1 might feel like it is still forever away, but it’s not. Do you have enough money set aside to pay the Australian Tax Office when it’s time to pay up?

It’s often around this time of year business owners start working out what they’ll need to earn over the next few months to cover their tax bill. For some people, this is also about the time of year panic starts to set in.

Always plan ahead

If you find you’re not going to have enough money set aside to pay your tax, work out your budget now. How much extra money will you have to put aside in order to have enough saved up to meet your liability?

Better yet, take a longer view of your taxation obligations. Remember, the money you owe the taxman is not your money. It’s the Government’s money. (No matter how much that might stick in your craw).

We recommend setting up a separate bank account and setting aside the correct amount of money you’ll need to pay your tax. The vital point here is that, that account is not for dipping into. It’s not a “rainy day fund”; it’s not a savings scheme — it’s a safe place to put the Government’s money until they’re ready to collect it.

Psychologically, keeping your tax dollars in a separate account is a great way to achieve a few things.

It makes it harder to spend it

Keeping your tax dollars in a dedicated account makes it harder to spend that money, because you know you shouldn’t touch it — and you know that, if you do, you’ll only end up scrambling to plug the hole you’ve created further down the track.

It grows at a manageable rate

Putting aside your tax obligations throughout the year also means you’re not getting to this time of year and discovering you need to put aside a huge lump sum in order to pay the impending bill.

It takes away the worry

Stop the panic! Planning and saving throughout the year means you know the money is always there, ready to pay your tax bill when it comes. Every dollar saved in your special “tax account” is a dollar you don’t have to worry about come tax time.

Whatever method you put in place to ensure you can pay your tax obligations, always remember it’s not your money. One way or another you’re going to have to find the funds to pay the taxman, so it’s better to be prepared.

If you need help keeping track of your financial data, budgets and cash flow, then it’s time to try Reep. Reep is software that gives you a clear picture of your financial situation, every step of the way.