BAS and tax bill funding: when growth leaves a bigger bill than expected

It’s one of the strangest feelings in business: your best year yet, and a tax bill you can’t pay. For young online businesses, it happens more often than anyone admits. Growth soaks up cash in stock, ads and people, while the tax on that growth is calculated on sales and profit. The bill arrives after the cash has already been spent.

Why do growing businesses get caught by tax bills?

Three mechanics combine:

1. GST is collected but not kept. Every GST-inclusive sale includes one-eleventh that belongs to the ATO. In a growth phase, that cash often gets spent on the next stock order before the BAS is due.
2. Profit isn’t cash. A business can be profitable on paper while its bank balance falls, because money is tied up in inventory and in customers who haven’t paid yet.
3. Tax is lumpy. Quarterly BAS, PAYG withholding for staff and annual income tax arrive on set dates. A big quarter means a big bill, usually timed for a quieter month.

For quarterly lodgers, the ATO’s BAS due dates are 28 October, 28 February, 28 April and 28 July. The February date is worth circling for online stores, because it covers the October to December quarter, including Black Friday and Christmas.

What are my options if I can’t pay the full amount?

Option	How it works	Things to weigh
Pay from cash	Clear the bill in full	May starve stock and ads at the wrong time
ATO payment plan	Pay the debt in instalments	General interest charge accrues daily; future obligations must still be paid on time
Business funding	Pay the ATO, repay the lender over a set term	Compare total cost; lender will assess ATO debt case by case
Combination	Part cash, part plan or funding	Can protect working capital while clearing the debt

The ATO notes that on a payment plan, general interest charge continues to accrue and the plan may default if later obligations aren’t met, making the full balance payable. Whether a plan or funding is better depends on the total dollar cost, how fast you can realistically repay, and what the cash is needed for in the meantime.

If you’re looking at a tax bill and a thin bank balance, find out what’s possible. Enquiring won’t touch your credit file.

How do lenders look at a business with a tax debt?

ATO debt is considered case by case. Lenders will usually want to understand:

• Why it happened — a growth spurt that tied up cash is a very different story from a business that’s losing money.
• How big it is relative to turnover, and whether other debts are stacked on top.
• Whether lodgments are up to date, even if payments are behind.
• What changes going forward, so the same squeeze doesn’t return next quarter.

Unsecured and line-of-credit options typically range from $5,000 to $500,000, sized on turnover and bank statements. Where the amount is larger, or statements show the strain, a property-secured business loan from $20,000 can be an alternative for founders who own property.

Illustrative example: the February surprise

Illustrative only. An online gift store had its biggest quarter ever from October to December, with sales well up on the year before. The founder reinvested most of the December cash into a large autumn stock order and a new product line. In February, the quarterly BAS shows GST and PAYG withholding owing of about $26,000, with $9,000 in the account.

Paying from cash would mean cancelling half the autumn order. The founder compares an ATO payment plan with a short-term facility to clear the BAS in full, looking at the total cost of each and how quickly autumn sales will cover repayments. Whichever route she takes, the lasting change is a separate tax account that receives a fixed share of every payout from now on.

How do I stop this happening again?

• Open a tax account. Move GST (one-eleventh of GST-inclusive sales) and a percentage for income tax into it every time a payout lands.
• Forecast the BAS monthly, not the week before it’s due.
• Watch the GST threshold. If you’re not registered yet, remember the ATO expects registration within 21 days of GST turnover reaching $75,000. See the GST milestone page.
• Plan peak-season cash with the BAS in mind. The peak-season stock page covers this.

What if I’m behind on lodging as well as paying?

Being behind on payments and being behind on lodgments are different problems, and the second one is usually worse. If returns and activity statements haven’t been lodged, neither you nor a lender can see the true size of the debt, and the ATO may estimate what’s owed.

The first step is almost always to get lodgments up to date, even if you can’t pay yet. That turns an unknown into a known number. From there, you can look at a payment plan, funding or a mix of both. Talk to your accountant or BAS agent about catching up, and keep copies of everything lodged.

Lenders who consider ATO debt case by case will usually want to see that lodgments are current. It shows the business is engaging with the problem rather than avoiding it, and it gives everyone an accurate figure to work with.

For the wider picture of why growth soaks up cash, see our guide to the cash conversion cycle for online stores.

Clear the bill, protect the growth

A tax bill caused by growth is a solvable problem, and dealing with it early keeps your options open. If you’d like to talk it through, send a short enquiry. There’s no credit check to enquire, we won’t hand your details to a string of lenders, and a real person will call you back. Please be upfront on the form about the amount owed and any payment arrangement in place — an accurate picture lets us match you properly the first time.