We know that most small business are required to pay their GSTon a quarterly basis. A problem we see a number of small businesses encounter, particularly those new to business, is that… good cashflow can be difficult when it comes around to paying the BAS. It is important to remember when charging customers, that you need to set aside an additional 10% invoiced for GST. This should not be considered as income of the business. It will end up being paid to the ATO at the end of the quarter. It is easy to forget, particularly when decisions need to be made about paying yourself or making investments for the business and you look at your bank balance to see what you can spend. To assist in dealing with this cashflow issue at the end of the quarter, some small businesses put the 10% aside into a separate bank account (Usually named a Tax Management Account) as soon as the income is received. By doing this, the funds are kept away from the general bank account. At the end of the quarter, when the BAS is prepared, it is very likely that the GST put aside may be too much because it doesn’t account for the GST refundable on the expenses incurred. So rather being short on cash at the end of the quarter there would actually be a little extra, which has been saved in the separate account. This system works well for most small businesses.