Quick answer
Set aside every week the GST you collect minus GST you pay, all PAYG withheld from wages, and an allowance for income tax on your profit. For income tax, companies that are base rate entities pay 25% on taxable profit; sole traders pay their personal marginal rate. Super under Payday Super now leaves with each pay run. Transfer these amounts to a separate tax account weekly so BAS and tax bills are already funded.
Key points
- GST and PAYG withholding are never your money — move them out weekly.
- Income tax needs an estimate: your accountant can give you a percentage of profit to use.
- Super under Payday Super leaves with each pay run, so budget it with wages.
- A separate tax account turns BAS day into a transfer, not a crisis.
The most common cash flow shock in small business isn’t a lost customer. It’s a tax bill that everyone knew was coming. GST, PAYG withholding and income tax sit in your bank account for weeks or months looking like working capital — until the due date arrives and the balance drops in one go.
The fix is simple and slightly boring: move the tax out every week.
Which taxes do you need to set aside for?
| Obligation | What it is | How much to set aside |
|---|---|---|
| GST | Tax collected from customers, minus GST credits on purchases | Net GST each week |
| PAYG withholding | Tax withheld from employees’ wages | 100% of amounts withheld |
| Super | Employer super guarantee (12% for 2025–26 and 2026–27) | Paid with each pay run under Payday Super |
| PAYG instalments | Prepayments of income tax | The instalment amount or rate on your notice |
| Income tax | Tax on your profit | An estimate agreed with your accountant |
The first two are the easy wins. They were never your money — you’re collecting them for the ATO — so there’s no reason to leave them mixed in with operating cash.
It’s worth checking the habit against your 2026–27 tax calendar so you know exactly when each amount will leave the account, and your EOFY checklist for the extra items that arrive around 30 June.
How do you work out GST to set aside?
For GST-inclusive taxable sales, the GST component is one-eleventh. So $11,000 of taxable sales includes $1,000 of GST. Subtract GST credits on business purchases and the difference is approximately what your BAS will ask for.
Some sales are GST-free (certain basic foods, some health services, exports), so if you have a mix, base the transfer on your taxable sales only. Your accounting software can report GST collected and paid weekly.
How much should you set aside for income tax?
That depends on your structure and profit.
- Companies — the ATO lists a 25% rate for base rate entities and 30% for other companies in 2025–26.
- Sole traders and partners — profit is taxed at your personal marginal rates, along with any other income you earn.
- Trusts — tax depends on how income is distributed.
A practical approach: ask your accountant for a percentage of profit to set aside, then apply it to your weekly or monthly profit estimate. If you’re paying PAYG instalments, those count towards the final bill, so the set-aside can be reduced by what you’ve already paid. Our explainer on PAYG instalments covers how they work.
What does the weekly method look like? (Illustrative)
A café operating as a company, registered for GST, has a typical week like this. All figures are illustrative.
- Taxable sales (GST-inclusive): $22,000 → GST collected $2,000
- GST credits on purchases: $700 → net GST $1,300
- PAYG withheld from wages: $1,150
- Estimated profit for the week: $2,400; accountant suggests setting aside 25% → $600
Weekly transfer to the tax account: $3,050. Over a 13-week quarter that’s about $39,650 — waiting and ready when the BAS and instalment fall due. Super goes out with each pay run under Payday Super, so it’s budgeted alongside wages rather than in the tax account.
If you’re already behind and a BAS is due soon, check whether funding could cover it — enquiring won’t show on your credit file.
Why does paying the ATO on time matter more now?
From 1 July 2025, the ATO’s general interest charge and shortfall interest charge are no longer tax deductible. Carrying tax debt has become more expensive than it looks on paper. The ATO can also report business tax debts to credit reporting bureaus when at least $100,000 is more than 90 days overdue and the business isn’t engaging with the ATO to manage it — something lenders will see. Staying current keeps your options open.
How do you make the habit stick?
- Automate it. Set a recurring transfer the day after your main takings or pay run.
- Use a separate account with no card attached.
- Reconcile quarterly. When the BAS is prepared, compare what you set aside with what’s owed and adjust the weekly amount.
- Put tax in your forecast. A 13-week cash flow forecast shows when each payment leaves.
What if your income is seasonal?
Seasonal businesses face a particular trap: the tax on the busy season falls due in the quiet one. A tourism operator’s summer takings produce a large BAS payable in late February or April — just as bookings slow.
Two adjustments help:
- Set aside a percentage, not a fixed amount. Transfer a set share of each week’s takings so busy weeks automatically fund the tax they create.
- Map the calendar. Put each BAS and instalment date against your seasonal pattern in a cash flow forecast. If a large payment lands in your slowest month, you’ll see it a quarter ahead.
If you pay PAYG instalments, the rate option can also help, because instalments then rise and fall with your actual income — see our PAYG instalments explainer.
When a tax bill outruns the buffer
Growth, a strong year or a one-off sale can leave a tax bill larger than the buffer you’ve built. Paying it on time protects your ATO standing and avoids non-deductible interest.
We look at trading businesses for cash-flow facilities typically from $5,000 to $500,000 and property-secured loans from $20,000 to $5,000,000, and we consider ATO debt case by case. The enquiry doesn’t involve a credit check, your details aren’t shopped to other lenders, and a real person calls to understand your situation. Please answer the form accurately — the size of the bill, your turnover and your timing — so we can find the right fit first time.
Frequently asked questions
What percentage of income should I save for tax?
There's no single percentage because it depends on your margins, structure and GST position. A practical method is to set aside the net GST and PAYG withheld exactly, then a percentage of profit for income tax that your accountant helps you choose.
How do I calculate GST to set aside?
For GST-inclusive taxable sales, the GST component is one-eleventh of the total. Subtract the GST credits on your business purchases. The difference is roughly what you'll owe on your BAS.
What tax rate do small companies pay?
For 2025–26 the ATO lists a 25% company tax rate for base rate entities and 30% for other companies. Your accountant can confirm which applies to you.
Should I keep tax money in a separate account?
Yes. A separate account, ideally one that's slightly inconvenient to spend from, stops GST and withholding being used as working capital by accident.
What if I haven't set aside enough for this quarter's BAS?
Talk to the ATO early about a payment plan, or consider funding that pays the ATO on time. ATO interest incurred from 1 July 2025 isn't tax deductible, so the cost of paying late has risen.