Home – New Forums Money matters Calculating changes in tax to stowe away as sales increase

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  • #983724
    happyez
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    Hello all

    Hope the title makes sense!

    I am a sole trader presently, I have a job (that pays the bills presently, and I will sell my services very soon and is likely to be taken up with vigour by quite a few people (so I am told).

    I want to siphon off a certain percentage in tax for each individual sale so I am not surprised by EOFY. Although it is hard to predict in advance what I will earn, I feel that once I jump into the next tax bracket, I will have not put enough aside per sale, as I calculate it at a lower rate/threshold?

    Anyone able to clarify how to do this the best?

    Thanks for any advance ideas.

    Eric Vigo

    #1143881
    Past-Member
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    My late dad, who was a Chartered Accountant, always suggested to me to put away 20% of my earnings in a separate savings account. (Also put GST away as well now.) Then there would be money for either tax or an unexpected bonus if I wasn’t required to access it. That advice has been sound for the past 26 years in business for myself.
    Cheers.

    #1143882
    happyez
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    Hi Karen

    Yeah, that’s that sort of thing I was thinking about, just do it straight away, put it aside – don’t even think that cash is yours (at least until it’s a bonus like your dad said). However, do you think 20% is too low? If accumulated earnings ends up pushing you above $30K (or whatever the next tax bracket is), 20% aside would mean you are behind in what you should pay.

    I was thinking that if you have an assumption about the amount of sales you may get (possibly based on conversion to sales if contacting x amount of potentials), and that may be more like 31%….

    Would you think make it more 31% rather than 20%?

    #1143883
    JacquiPryor
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    It’s really going to depend on what you earn.

    A quick look at the ATO rates (http://www.ato.gov.au/individuals/content.aspx?doc=/content/12333.htm&mnu=42590&mfp=001) would suggest if you earn up to 37K then your total tax would be no more than 10% .. in fact it would be less (At $3572). Plus, you’ll not doubt have expenses to claim as deductions to bring it down.

    Just over 20% would be accurate it seems for taxable income up to 80K (once you have deducted expenses, then 20% should work out about right looking at those rates)…

    So, it would seem, looking at the ATO link above that 20% should be sufficient up to about 80K earnings. Over that then a little more would be needed etc. (Plus, if you are registered for GST this would be a separate tax & calculation).

    All of that said – if you were to put aside 31%, you could end up with left over at the end of the financial year, which is not a bad thing! You’d have some extra for yourself or to put into Super etc etc.

    #1143884
    James Millar
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    I think KarenC (and her dad) have a good number. If you asked me to make a guess across all FS member SME’s without knowing anything about their individual circumstances then I would say 20% is going to eliminate most nasty surprises.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1143885
    happyez
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    Well, thanks all. I’ll go for that!

    Growing to love the expertise floating around the FS forums, and I would love to contribute soon myself.

    Eric

    #1143886
    James Millar
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    happyez, post: 164803 wrote:
    Well, thanks all. I’ll go for that!

    Growing to love the expertise floating around the FS forums, and I would love to contribute soon myself.

    Eric

    I think you already have. Good questions are as important as good responses.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1143887
    happyez
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    Cheers all.

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