Running a small business in Australia is a challenging affair. In addition to the daily challenges of running a business and trying to make it profitable, there are a myriad of other things to keep on top of. From superannuation for your staff, to arranging insurance and organising suppliers…especially if you’ve just started a new business, it can all seem overwhelming.
In the midst of all this work (and let’s face it…excitement too) it’s always a temptation to let the taxes take care of themselves; after all, when you’re a budding new business and are still working towards profitability, surely you don’t have any taxes to pay…you have to make a profit before tax is an issue, right?
Actually, no. And this is a trap that many new businesses fall into; to assume that because your bank balance is about the same each month, that you are breaking even and shouldn’t have any tax to pay. It’s wrong to assume this.
It’s actually quite common to make a loss, but still have a lot of GST to pay; this is especially the case in the food business, where the majority of your expenses are fresh food and wages (neither of which give you a GST credit). And along with GST, employee PAYG is payable to the ATO, too.
That’s why it’s vitally important for new businesses to keep on top of their accounting. When you’ve just started a business, falling a few quarters behind on your GST might seem trivial, but it may hide a very nasty surprise and a big bill from the ATO when you do finally catch up.