Staying Proactive with Your Business: Keys to Avoiding ATO Scrutiny

As many of you may have seen in a recent ABC News article, the Australian Taxation Office (ATO) is ramping up efforts to recover $50 billion in unpaid taxes and superannuation. This serves as a timely reminder of the importance of staying proactive with your business requirements to avoid potential penalties and financial strain.

Why Being Proactive Matters

The ATO's intensified focus highlights the need for businesses to be diligent in meeting their tax and superannuation obligations. Falling behind on these responsibilities can lead to significant financial and legal consequences. By taking a proactive approach, you not only ensure compliance but also safeguard the financial health of your business.

Asking for Help is a Sign of Strength

It's crucial to remember that seeking help isn't a sign of weakness—it's a strategic move to ensure your business runs smoothly. Whether you're struggling with cash flow, keeping up with lodgement deadlines, or managing other financial aspects, reaching out for assistance can make a world of difference.

Practical Tip: The Put Away Rule

You can be even more proactive, by being organised and setting aside 40% of your incoming revenue to cover essential expenses such as superannuation, taxes, and wage tax. By consistently putting away this portion of your income, you can ensure that you have enough funds available when these liabilities are due, avoiding last-minute scrambles and potential penalties. Implementing this rule can greatly improve your cash flow management and provide peace of mind knowing that your financial obligations are being met systematically.

Key Indicators Your Business May Need Support

1. Cash Flow Issues: Consistently struggling to cover expenses or pay bills on time.

2. Personal Spending Within the Business: Using business funds for personal expenses, which can complicate financial tracking.

3. Missed Lodgement Deadlines: Regularly failing to submit tax returns, BAS, or superannuation contributions on time.

4. Rising Debt Levels: Accumulating debts that become increasingly hard to manage.

Steps to Take

• Review Your Financials Regularly: Conduct regular audits of your financial statements to catch potential issues early.

• Create a Budget: Establish a clear budget to manage your expenses and revenues effectively.

• Seek Professional Advice: Engage with financial advisors or accountants to get tailored advice and support.

• Implement Strong Financial Controls: Ensure robust financial controls are in place to prevent misuse of business funds.

• Evaluate Your Price Point: Regularly assess your pricing strategy to ensure it covers your costs and aligns with market expectations without driving away customers.

• Forward Forecasting: Develop financial forecasts to anticipate future expenses and revenues, helping you to make informed business decisions.

• Having a Savings Plan: Putting away 40% of income revenue into a separate bank account for GST, tax, superannuation and wages tax withheld.
  

If you recognise any of these indicators within your business, or feel like you need help in implementing the 40% rule, WE CAN HELP. Our team at MJA Business Solutions is here to help you navigate these challenges and ensure your business remains compliant and financially healthy.

Stay proactive, and don't hesitate to reach out for the support you need.

Mel

Reference:

1. Australian Broadcasting Corporation. (2024, July 19). ATO good cop to bad cop to claw back $50 billion in tax and super. Retrieved from https://www.abc.net.au/news/2024-07-19/ato-good-cop-to-bad-cop-to-claw-back-50-billion-in-tax-and-super/104114212