'Just put 30% aside' is not a tax strategy

If you’ve ever been told to “just put 30% aside for tax”, you’re not alone.

It’s one of the most common pieces of advice given to Australian small business owners, and one of the most misleading.

Because the Australian tax system doesn’t work on rules of thumb. And the Australian Taxation Office definitely doesn’t assess your obligations based on a nice round percentage.

Let’s break down why this advice fails, and what actually determines how much you should be setting aside.

Why the “30% rule” sounds helpful (but isn’t)

The appeal is obvious:

• It’s simple

• It feels responsible

• It removes the need to look too closely at the numbers

But simplicity is exactly the problem.

In Australia, tax isn’t a single number. It’s a mix of moving parts that change depending on how your business is structured and how it operates.

What the ATO actually looks at

Here’s what really determines your tax position, none of which are captured by a flat 30%.

1. Your business structure

• Sole traders are taxed at individual marginal rates

• Companies pay company tax, then potentially tax again when profits are paid out

• Trusts distribute income to beneficiaries, each taxed differently

A blanket percentage ignores all of this.

2. GST is not your money

GST collected isn’t income, it’s money you’re holding on behalf of the ATO.

Two businesses can have identical revenue and wildly different GST outcomes depending on:

• Whether they’re cash or accrual

• How well transactions are reconciled

• Timing of invoicing and payments

Setting aside “30%” without separating GST is how businesses accidentally spend future BAS money.

3. PAYG changes everything

If you have staff:

• PAYG withholding is due regardless of profitability

• Super obligations sit outside income tax entirely

• Missed or delayed payroll processing distorts your real position

Many businesses think they’re covered until payroll catches up and the BAS blows out.

4. PAYG instalments are not final tax

PAYG instalments are estimates based on past performance.

They can:

• Overestimate tax in a slow year

• Underestimate tax during growth

• Create a false sense of security if you assume they’re “enough”

Again, not captured by a generic percentage.

Why rules of thumb fail in real businesses

The biggest issue with “just put 30% aside” is that it disconnects tax from reality.

It doesn’t adjust when:

• Revenue spikes or drops

• You hire staff

• You change pricing or margins

• You draw more money personally

• Your business grows faster than last year

And that’s why businesses can be “doing the right thing” and still end up short.

Where AccNav comes in

This is exactly the gap AccNav is designed to close.

Instead of guessing:

• AccNav reads your live accounting data (e.g. from Xero)

• Separates GST, PAYG, payroll, drawings and profit

• Estimates what your obligations are right now, not last quarter

• Flags when your current set-aside is too low (or unnecessarily high)

No rules of thumb. No panic at BAS time. Just clarity.

The real question isn’t “is 30% enough?”

It’s: “Based on how my business actually operates, am I setting aside the right amount today?”

Join our Bookkeeping Series and replace guesswork with numbers that reflect how the ATO actually works - before it becomes a problem.