Failing to manage and pay GST is a huge cause of business insolvency. Eliminate this risk and your business will have a much better chance of longevity.

Managing GST is both easier and harder than you think.

It’s easier because it’s a simple process that anyone can do.

It’s harder because it takes attention and discipline.

When money comes in, get rid of the GST. It’s really that simple. Pay it straight to the ATO.
You might think, I don’t know how much that will be. Alternatively, you might think that it could earn some interest, or the money might be needed in the meantime or that you will transfer the GST to a separate bank account. None of these are good reasons for not paying the ATO straight away. It’s not your money so don’t keep it and pretend it’s yours.

Calculate the GST by referring to your last four BAS’s and work out net GST paid as a percentage of gross receipts. Apply this percentage to what’s been received each day and make the payment.

If you are in a business with inconsistent cashflows, such as building, then you may need more time to work out the amount to pay. You may need to forecast the expenses for the remainder of the GST period and work out what the percentage of net GST will be. Even if you get the percentage wrong, making a payment should still take care of 80% of the GST payable.

You are not missing out on much interest income as interest rates are so low.

If you think you need to use the funds to pay for operations and think you’ll pay the GST later, you are either not making enough money or not being resourceful enough.

If you transfer the money to a separate bank account, what’s to say you won’t use it for operations. Common transfers to a separate GST account are often at the full GST amount (ie. 1/11th) but this isn’t what you will end up paying, as you will have expenses that incur GST, so this is a recipe for then taking funds from the GST account as you know you have overpaid into your GST bank account. The question then becomes, how do you manage how much you take back. It can get messy and the risk of spending this money is too great for it to work well in many cases. Keep it simple, work out the net GST percentage you are likely to pay and pay it straight to the ATO.

You might find, as I have, that making the daily payment reduces the resentment of paying to the government what feels like your hard-earned money. The longer it sits in your bank account, the more it feels like it’s yours and the more resentful you can become. When there is an almost unthinking daily payment, it can reduce this resentment.

Another advantage of this practice is that we typically judge our business’ health by the funds in the bank and the amount of our debtors and creditors. If we get rid of the GST, we will have a more accurate picture of what’s really ours. We can make appropriate decisions based on the knowledge that all the money in bank is ours, rather than being caught in moments of indecision when we don’t know what is really ours to spend.

A daily GST payment may seem over the top and if you are disciplined enough to still carry out a regular payment but at less frequent intervals, go for it. I’ve found a daily payment works for me as I do it first thing each day without thinking.

Good luck with managing your GST, I hope you manage it without stress and can watch your business thrive.