How to tackle tax debts and improve cashflow
by Greg Carroll at www.attitudefinance.com
Usually around this time of year businesses can be facing some fairly substantial tax bills. While this can mean business has been profitable, that profit it isn't necessarily reflected in cashflow. Sales growth, abnormal expenses or purchases, and slow debtor payments can quickly eat into profits and erode your cash position.
This can make it tempting for some businesses to delay submission of their BAS and tax returns to defer tax payments. This can however incur substantial fines. Penalties range from $110 for every 28 days the BAS is late for small businesses, up to $550 for every 28 days for large businesses. The maximum penalty for a late lodgment that is more than 112 days overdue for a small business is $550 and $2750 for large businesses.
The ATO can also apply General Interest Charge to late payments, which is applied at the 90-day bank bill rate plus 7 per cent, with the current rate being around 12.87 per cent a year interest. The ATO is also taking a much tougher line on small business and has already taken legal action against thousands of defaulting taxpayers.
The goods news is, there are a number of solutions for all types of business situations:
In many cases these solutions can actually improve a businesses cashflow position. In some cases it has been possible to improve cashflow by more than $10,000 per annum.
The key is to take action early. The problem with many businesses is that they leave it too late before they start taking action. They run into serious cashflow difficulties, have creditors pounding on their door, run up huge tax debts, start incurring defaults on their loans and credit cards and then go to their accountant for help.
While it is still possible at this late stage to rescue the situation your odds are greatly improved if you act earlier in the game. But even more importantly, acting earlier also increases the likelihood of a lower cost solution.
If you are experiencing cashflow difficulties or can see some problems up ahead then act now and contact Greg Carroll on 07 3666 0110 or contact us to discuss your situation.