Taxman and your Summer Break

Hamish Mexted Reducing Tax

The summer break can be hard on cashflow for many businesses.  Zero sales over the close down period coupled with paying staff annual leave and increased holiday expenses make it a testing time for many business owners.  Throw in the taxman and a business can be in trouble quicker than the fat man down a chimney.

First up, most employers have PAYE due on 20 December and again on 20 January.  It can be tough to stump up with two lots of PAYE given zero sales for some.  Queue the New Year and (again, for most) up comes the GST payment on 15 January, along with a provisional tax payment on the same day.  Add in the odd student loan repayment, a FBT payment plus some terminal tax and before you know it you’re back into the overdraft.

Fear not, there are ways to deal with it.  Strong budgeting and cashflow management, together with a good accounting system will help you stay on top of it.

Making sure you put the cash to one side is the key.  It’s common sense, but if you squirrel away enough during the good times, you’ll be fine through the not-so-good times.  The question then becomes how much you need to put to one side?

It’s relatively straight forward to figure out how much PAYE to have put to one side.  If you’re struggling with this any decent payroll system can help (checkout SmartPayroll or iPayroll).  With a good accounting system (we recommend Xero), it’s a breeze to know how much GST you owe at any point in time.  Provisional tax can be a bit trickier to calculate accurately, but with the help of a good accountant who gives you plenty of warning you’ll be fine.

The key to managing the summer break is knowing exactly what taxes you’re up for in advance of having to pay them.  This means you need a good accounting system, like Xero, and an accountant who understands the pressures of Christmas.