If you have a company running a business and you’re prepaying some tax for the current financial year, this is something that has been anticipated. The pay as you go (PAYG) instalments is the way that you prepay tax for the current year and usually, it’s based on last year’s returns that were lodged. The last year of business and the current year can be vastly different for a business in terms of performance and the business is still paying tax as if it’s trading as it was last year.
PAYG does not necessarily mean you are saving tax but it is a cash flow help so you don’t have to prepay as much. Businesses and companies can opt into a real-time PAYG instalments system and calculations which is based off of the accounting software you use. It will be looked into by looking at the current year and then they will calculate the tax instalment that you are supposed to be paying based on the performance of your business currently and not for the previous year.
The great thing about this is, it helps you budget your cash flow and plan your cash a lot easier. For example, some clients are paying $15,000 in instalments, but they don’t have that money and start falling behind on their payments. While there is the ability to levy it down to a reasonable amount, this is more of a proactive approach. So in reality, it is being realigned to be closer to what your business is actually doing at the moment and in turn, managing cash flow is more important than ever.
NOTE: The PAYG Instalment default calculation of last year + 10% will be changed to 2% for 2023 FY
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
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