Tax planning


30th April, 2024

How Long Do I Have to Pay My Tax Bill? A Guide for Small Business Owners

Taxes are a part of life for small business owners in Australia. Whether you’re a sole trader, in a partnership, or have a company or trust, staying on top of your tax obligations is essential for the financial health of your business.

One question that often arises in this area is: How long do I have to pay my tax bill?

In this guide, we’ll break down the timelines and deadlines set by the Australian Tax Office (ATO) for paying your tax bill, helping you navigate the process with confidence.

Understanding Your Tax Obligations

Before we delve into payment timelines, let’s quickly review your tax obligations as a small business owner in Australia.

Depending on your business structure, you may be required to pay income tax, goods and services tax (GST), fringe benefits tax (FBT), and other taxes.

Income Tax is the tax you pay on your business profits. The amount you owe is based on your taxable income after deductions and credits.

If your business is registered for GST and your annual turnover exceeds the GST threshold (currently $75,000), you’ll need to pay GST on your taxable sales.

If you provide fringe benefits to your employees or associates, you may be liable to pay FBT.

Now, let’s get into the nitty-gritty of tax payment timelines.

Payment Deadlines for Income Tax

For most small businesses, the deadline for paying income tax is determined by their annual income and business structure.

Sole Traders and Partnerships

If you operate as a sole trader or partnership, your income tax is usually due on 21 November each year.

However, if you lodge your return through a registered tax agent, you may have an extended deadline of up to 15 May of the following year.

Companies and Trusts

Companies and trusts generally have a longer window for paying income tax.

The deadline is typically 28 February following the end of the income year.

However, if you lodge your tax return through a tax agent, you may have until 31 March.

It’s important to note that these deadlines may vary depending on your individual circumstances, so always check with the ATO or your tax advisor for the most accurate information.

Tax bill

Payment Deadlines for Business and/or Instalment Activity Statements (BAS/IAS)

For businesses registered for GST, the payment deadlines for GST and other tax liabilities are typically determined by your reporting period.

Firstly, if you report and pay GST monthly, the payment is due on the 21st day of the following month.

Secondly, if you report and pay GST quarterly, the payment is due on the 28th day of the month following the end of the quarter.

Finally, if you report and pay GST annually, the payment is due on 28 February following the end of the income year.

Again, it’s essential to confirm your reporting and payment deadlines with the ATO to avoid any penalties or late fees.

Managing Your Tax Payments

Now that you know the deadlines, let’s discuss some tips for managing your tax payments effectively.

Keep Accurate Records and keep evidence

Maintain detailed records of your income, expenses, and tax liabilities throughout the year. Keep all evidence such as invoices, receipts, legal documents.

This will help you accurately calculate your tax obligations and avoid any surprises come tax time.

Set Aside Funds

Set aside a portion of your business income each month to cover your tax liabilities. This is vital in your first year of business when you have little idea of what your bill will be

This can help prevent cash flow issues when it’s time to pay your tax bill.

Use Tax Accounting Software

Invest in tax accounting software such as MYOB’s offerings to streamline your tax reporting and payments.

These tools can automate calculations, generate reports, and remind you of upcoming deadlines.

Seek Professional Advice

If you’re unsure about your obligations or payment deadlines, don’t hesitate to seek advice from a qualified tax professional.

They can provide personalised guidance based on your business circumstances.

Tax time tips

What Happens If You Can’t Pay Your Tax Bill by the Deadline?

The ATO tells taxpayers to pay their tax bill in full by the due date to avoid penalties and interest.

In a media release in late 2023, ATO Assistant Commissioner Jillian Kitto reminded entrepreneurs that paying tax isn’t optional. She added anyone who misses their payment due date shouldn’t expect interest or penalties to be remitted.

‘‘Our preferred approach is to work with you through engagement rather than enforcement, and we expect anyone who can’t pay on time to reach out to us or their tax professional before their bill is due,” she said.

Ms Kitto also noted that “If you can’t pay your tax bill in full, you may be eligible for a payment plan. However, it’s likely that you will be better off financially if you pay in full and on time, rather than arranging a payment plan.”

The ATO urges businesses to contact them before a tax debt occurs where interest accrues and before it takes action.

This could include a director penalty notice, a garnishee (basically a court-ordered request to pay), a disclosure of the business’s tax debt, and in some cases, legal action such as winding up a business.

Keep in mind that interest on overdue tax debts compounds daily at an annual rate of 11.15%.

Paying your tax bill on time is a fundamental aspect of running a successful small business.

By understanding your tax obligations and staying organised throughout the year, you can ensure you meet your payment deadlines and avoid any penalties or late fees.

Remember, if you ever have any questions or concerns about your tax payments, the ATO and tax professionals are there to help. Keep calm, stay informed, and stay on top of your tax game!

Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.