Setting aside small, regular amounts of money for tax (kept separate from your everyday business funds) helps ensure you have enough available when your tax obligations fall due and reduces cash flow pressure.

Consider setting up one or more separate bank accounts and transferring money into them regularly to help cover the goods and services tax (GST), pay as you go (PAYG) withholding or instalments, staff super or end of year income tax obligations. 

Example: Setting aside money for tax 

Amari is a sole trader who runs a small art gallery and is registered for GST.  

To stay on top of his tax responsibilities, he transfers a portion of his income into a separate bank account each week. This helps him prepare for both his quarterly GST payments and his expected end of year tax bill. 

At the end of the quarter, Amari lodges his BAS showing the GST amount he needs to pay. At the same time, he also receives a larger than usual invoice from one of his suppliers. 

Because Amari has been regularly setting aside money for GST, he is able to pay his BAS on time and pay the supplier invoice without straining his cash flow. 

By planning ahead in this way, Amari also avoids having to pay general interest charge (GIC) for a late ATO payment.