Save Money for your Tax Return

Many readers of this site are small business operators or stay at home mums running business ideas from within their house. People have often asked, what is the best way to save money for my tax return at the end of the year?

Today I will share with you how I save for tax each year, and the best way to not have a tax bill that sneaks up on you leaving you out of pocket and broke!

Tips on Saving Money for Tax

• Every cent you earn, save 30% of it into your high interest account or savings account that it hard to touch, eg; not easy to withdraw the money.
• Add $250 per quarter into your tax account, that way by the end of the year you will have another $1000 in that account, even if you dont use it you can save it.

Earn Interest on your Tax Money

Did you know that your tax savings can earn money for you? Although the interest you earn is taxable at the full rate of your return, it still adds a few extra dollars to the final balance at the end of the year.

PAYG Tax Payments

The ATO is known to make ABN holders and small businesses start paying PAYG (Pay as you go) tax installments once you make over $70,000 or so, which means per quarter they will demand around $1400 or more in tax installments, even if you arent on par to earn that much – as it is based off last years tax return. This means you may have to sacrifice a bit more then 30% of your earnings to the tax man, eg; just pay the tax bill and see it as a form of savings as you will likely get a refund at the end of the year.

Things to avoid when saving for tax

Here are the golden rules of saving for tax payments;

1. Do not withdraw the tax money.
2. The ‘I will pay the tax back next pay cheque’ never works.
3. Be religious with your payments, be strong and stick to 30%.
4. Do not check how much money is in the account. Just add to it over the year and let it surprise you at the end of the year.
5. Use a tax accountant so that you can lodge your return much later then the rest of society. Read my old article on the benefits of having a tax accountant.

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