In the perfect world, we’d all be up-to-date with our tax obligations and payments. As you know, it’s often a different story in reality. In fact, many tradies end up fearing the Australian Tax Office (ATO).
When you’re up to your eyeballs managing your trade business, getting a poke from the ATO about your tax repayments can fill you with dread. If you’re in a sticky tax situation, go in on the front foot.
The ATO is not the enemy. The ATO is simply a creditor. Think of the ATO as just another company to which you owe money. Paying tax is unavoidable – and is part and parcel of owning a business.
Here’s how to make this process more seamless and less stressful.
Make the payment of ATO bills easier
While paying tax is a topic that’s top of mind at the end of the financial year, it demands year-round attention from you and your accountant. It sounds obvious. Still, many of us are left scrambling when the bill comes.
Our advice – set up a separate bank account called, ‘ATO Holding Account’. By moving money into this account on a weekly basis, you’ll have the funds ready to go. That way, there’ll be no bill-shock scenario.
Guesstimate the value of your ATO bill and understand when it’s due. You can account for this in your Accounts Payable Creditors Report. Cash flow (or lack thereof) is what can turn this neat plan pear-shaped.
3 tips when negotiating with the ATO
The ATO is usually willing to negotiate with you to meet your tax obligations, if necessary. If you are struggling to pay, you should contact the ATO to discuss your options, taking the following tips on board:
Tip #1. Factor in a buffer
When negotiating with the ATO, start with a figure that is far less than you can pay (rather than the maximum you can pay). This provides you with a buffer should the ATO try to negotiate upwards.
Tip #2. Stay friendly and calm
ATO customer service representatives are only human. When it comes to your financial destiny with the ATO, they have the ultimate power (within the ATO guidelines). Your behaviour may influence their response.
Tip #3. Pay the debt slowly
When paying a backlog of tax, always keep up with current obligations and pay the debt as slowly as possible, based on the obligations you’ve agreed upon. Your tax debt is not going to magically disappear.
People hate paying taxes. There’s nothing new about feeling fearful about it – even resentful. The thing is, there’s no getting around it. Don’t waste your time and energy fighting something you can’t change.
And, if you do happen to fall behind in your tax obligations (most of us have at some point), take the initiative to negotiate with the ATO. You’ll have a much better outcome than if you stick your head in the sand.
What’s next?
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.
