How much should I put aside for tax and GST?

General advice only · AFSL 222640 · Global Mutual Funds Pty Ltd

The direct answer

For GST, set aside the full GST component of your sales — one-eleventh of GST-inclusive income — because it is not your money. For income tax, a percentage of profit (not revenue) based on your expected marginal rate or company rate is a sensible starting point. Moving both into a separate bank account each week prevents BAS-time shocks.

What it depends on

The full answer depends on your specific circumstances. Here’s what matters.

Your structure and rate

Sole traders pay marginal rates plus Medicare levy; base rate entity companies pay 25%. Your percentage should reflect your actual rate.

PAYG instalments

Once you have business or investment income above certain levels, the ATO may put you into PAYG instalments, which spreads tax through the year.

GST credits

GST you pay on business expenses reduces what you owe. Your net GST is collected minus credits.

The last 10%

What a qualified professional can add

The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.

Calculating an accurate set-aside percentage for your situation
Setting up bank accounts and automation for tax savings
Forecasting BAS and income tax so there are no surprises

Questions to ask before you engage one

If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.

What percentage of profit should I set aside for income tax?

Am I, or will I be, in PAYG instalments?

How much do I owe in GST right now?

Should I use a separate account for tax?

Your next step

Open a separate savings account named "Tax" and transfer one-eleventh of each week's GST-inclusive sales into it, plus your income tax percentage.

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