How to Set Aside Tax from Job, including Deposits and Partial Payments
- johnry8
- 2 days ago
- 2 min read
Getting a deposit or part-payment feels great, especially when you’re juggling multiple jobs. But if you don’t set aside the tax portion right away, it can catch up with you fast.
Many small business owners, especially tradies, make the mistake of treating deposits as extra spending money. The problem? That money still counts as income, which means it’s taxable. Ignoring that fact can lead to:
Unexpected tax bills
Penalties from the ATO
Cash flow headaches when it’s time to lodge your BAS or tax return
If you’ve ever felt the pressure of coming up with tax money months after a job is done, this guide will help you stay ahead.
1. Know When You’re Taxed
Whether it’s a small deposit or half the job upfront, most payments are considered income as soon as you receive them. That means they need to be reported for both GST and income tax purposes.
If you're registered for GST, you’ll need to include the GST portion in the same period you receive the deposit. And whether you're a sole trader or running a company, that payment counts as part of your annual income.
What to avoid: Waiting until the job is finished to log the income What to do instead: Record all deposits as soon as they land in your account
2. Set Up a Separate Tax Account
One of the easiest ways to stay out of trouble is to create a separate bank account for tax. Then, every time a client pays a deposit or partial amount, move a portion into this account.
Here’s a simple guide:
10 percent for GST if you’re registered
Around 20% to 30% percent for income tax depending on how much you earn and what your goals are. Although this is a over-simplified guide, it will help simplify putting the tax moneys away, which a lot of tradies struggle with.
Let’s say you receive a $5,000 deposit. You might transfer $500 to cover GST and another $1,000 to $1,500 for tax. This keeps your main business account accurate and makes sure you’re not accidentally spending what you’ll owe later.
3. Invoice Clearly and Track Everything
When you send invoices, make sure they clearly show the GST and any deposit terms. This protects both you and your clients and it helps avoid confusion later.
Tracking your deposits also means you can:
File your BAS correctly
Prevent duplicate income entries
Prove everything to the ATO if you ever get audited
If you’re using accounting software like Xero, MYOB or QuickBooks, set it up to automatically track tax on every payment. It will save you time and a lot of stress.
4. Make Tax Part of Your Monthly Planning
Tax shouldn’t be an afterthought. Build it into your regular budget checks. Each month or quarter, block out a time to sit down and review how much you’ve received in deposits and how much you’ve set aside for tax.
This helps you:
Stay on top of your obligations
Avoid cash shortfalls
Prepare for any upcoming payments
It’s also a good idea to speak with your accountant (Rise Accountants) about whether PAYG instalments are right for your business. This could be a strategy to spread out the tax payment across the year instead of arriving as one big bill at the end of the year.
Not sure how set aside the right amount for tax?