Part of running a successful business is understanding and managing taxes and how they can affect your budget and cash flow. One element of good tax management is determining your indirect tax liability and ensuring your business is in a good position to fund that liability. Cash flow is king and juggling the various obligations is often difficult for business owners, especially now with increasing interest rates and cost of living pressures. But we can help.
Indirect taxes in Australia can include items such as:
- Goods and Services Tax
- Payroll Tax
- Luxury Car Tax
- Wine Equalisation Tax
- Fuel Tax Credits
There are many rules and requirements that can apply to the above taxes. The most common impact to your business will most likely be from Goods and Services Tax “GST”. Take a look at the following common areas that may require some additional focus:
- Import of Stock – GST is payable on the import of goods into Australia. This tax is charged by customs before the goods are released at the point of entry. Your invoice from your agent will usually include Freight costs, customs duty, handling fees and the GST on import. Always make sure your GST on this transaction is the amount noted on the invoice and not ten percent of the total of the invoice.
- Sale of Fixed Assets – When your business is registered for GST, you are also required to include GST on the sale of your business assets. But remember, partial exceptions can apply when selling assets only partially used in the business such as a motor vehicle with a private use proportion.
- Depreciation Cost Limit – You are able to claim the GST on a vehicle used in your business up to the depreciation cost limit of $68,108 for the 2023-2024 financial year. The GST proportion on the purchase price over this limit is added to the vehicle purchase price however the depreciation for tax purposes is limited to the Depreciation Cost Limit.
- Insurance Policies – Insurance policies include a stamp duty component. Stamp duty is GST free however the balance of the policy includes GST. It’s important to ensure the GST that’s claimed agrees to the amount shown on your insurance invoice.
How do you manage these funding demands on your business? The answer is budgeting and cash flow projections. Annual, Quarterly, Monthly budgets and cash collection projections are critical in accurately predicting your ongoing performance and the cash flow that will be available to meet the projected expenditures.
Only when you know your current situation and projected requirements can you be proactive in obtaining solutions to cover any short term funding requirements.
Your local Accru Advisor can help you with your budgets and cash flow projections to ensure you are prepared for the future.Get in touch to find out more.
