The Tax Set-Aside Habit That Stops BAS Time Being a Shock

A good month lands, the bank balance looks healthy, and you buy the ute you have been putting off. Then the BAS falls due and the money that looked like profit turns out to have been the tax office's all along. This is one of the most common ways a busy trade business gets into trouble, and it has nothing to do with how well the work is going.

Why the Account Balance Lies

Every invoice you send with GST on it includes money that was never yours. You collected it on behalf of the tax office and you are holding it until the BAS is due. On top of that sits income tax on whatever profit the business makes, and super for anyone on the books including yourself if you pay it.

None of that is visible when you look at the banking app. The balance shows one number. Your obligations sit in a different place entirely, usually in the back of your mind, and they only become real when a due date arrives. A business can be genuinely profitable and still be caught short simply because the money got spent before it was separated.

Work Out Your Own Percentage

The fix is to move a fixed percentage of every payment received into a separate account the moment it lands. The percentage is made up of three parts: the GST you collected, an allowance for income tax on your profit, and super if it applies.

GST is the straightforward part if you are registered. Income tax is the part people guess at, and guessing low is what causes the shock. Your accountant can give you a realistic percentage based on your actual margins rather than a number off the internet, and that conversation takes about ten minutes. If you have been trading a year or more, last year's return tells you most of what you need.

The point is not to land on a perfect figure. It is to land on a figure that is high enough that you are never short, and then to stop thinking about it.

Use a Second Account, Not Willpower

Keeping the money in the main account and promising yourself not to touch it does not work, because the money does not look any different from the rest of it. Open a separate account, preferably at a different institution or at least off the main screen in your banking app, and treat it as untouchable.

The separation needs to be physical enough that spending it requires a deliberate transfer rather than a tap. That small amount of friction is the entire mechanism.

Move It on a Fixed Day

Pick a day and stick to it. Some owners move money the moment each payment clears, which is the tidiest approach if your invoicing is steady. Others do it once a week, usually the same morning they do the rest of their admin.

Weekly works well for most trade businesses because it fits alongside whatever else you already do on that day, and because a week is short enough that nothing gets spent in the meantime. Monthly is workable but leaves more room for a big expense to swallow the set-aside before it gets moved.

Whatever you choose, put it in the calendar as a recurring appointment rather than relying on memory during a busy week. If your accounting software can trigger a reminder when an invoice is marked paid, use it.

What to Do If You Are Already Behind

Plenty of trade businesses are already carrying a tax debt when they read something like this. The set-aside habit still works, it just needs a second layer on top.

Start setting aside for the current period immediately so the hole stops getting deeper. Then deal with the existing debt separately, either through a payment plan or by putting a fixed amount aside each week on top of the current set-aside. The tax office is generally more workable with people who make contact early than with people who go quiet, and a payment arrangement is a normal thing to ask for rather than an admission of failure.

Trying to fix both problems with one pot of money is where most catch-up plans fall over. Keep them separate.

Review the Percentage Twice a Year

Margins move. If you have put your rates up, taken on staff, or shifted the mix of work towards jobs with more materials in them, the percentage that was right last year may not be right now. A quick check twice a year, or after any significant change to how the business runs, is enough.

If the set-aside account is consistently overflowing after each BAS, you can bring the percentage down and free up working capital. If it is consistently short, put it up before the shortfall compounds.

The Short Version

• Money in the account is not all yours, and the balance will not tell you which part is
• Work out a realistic percentage covering GST, income tax and super with your accountant
• Move it into a separate account, not a mental note
• Do it on a fixed day, weekly for most trade businesses
• If you are behind, set aside for the current period first, then handle the debt separately
• Review the percentage twice a year or after any big change

Why It Matters More Than It Sounds

This is not an exciting habit and it will not win you a single extra job. What it does is remove one of the few things that can sink an otherwise healthy trade business. Owners who have run it for a year or two generally describe BAS time as uneventful, which is exactly what you want from it.

Frequently Asked Questions

What percentage should a trade business set aside for tax?

It depends on your margins, whether you are registered for GST, and whether you have staff. Rather than using a generic figure, ask your accountant to work it out from your actual numbers, or use last year's return as a starting point and review it after the next BAS.

Can I just leave the money in my main account and be disciplined about it?

Most people find they cannot, because the money looks identical to working capital when it sits in the same place. A separate account adds just enough friction that spending it becomes a deliberate decision rather than an accident.

What if I am already behind on my tax?

Start setting aside for the current period straight away so the problem stops growing, then deal with the existing debt separately through a payment arrangement. Contacting the tax office early generally gives you more options than waiting.