The GST Bank Account Method

The ATO's total debt book has climbed past $105 billion, with roughly $46 billion of that classed as collectable, and around 65 per cent of it owed by small business. I have run trades and services businesses in Sydney for over two decades, and I have personally owed the ATO $200,000 at one point. I am not an accountant, but I built a system after that experience that I have never abandoned since, and it is simple enough to set up this week. Here it is, step by step.

Every time a client pays an invoice that includes GST, roughly a tenth of that payment was never your money. It passed through your account on its way to the ATO. The mistake almost every small business makes is treating that GST portion as available cash sitting in the same pool as genuine revenue. It is not revenue. It is a liability sitting in your bank account disguised as a balance.

Step two: separate it immediately, not quarterly

Do not wait until the end of the quarter to work out what you owe. Open a second account, purely for GST, and every time a payment lands, transfer the GST portion out of your main account and into that one, the same day if possible. If you receive several payments in a single day, calculate your total daily revenue, work out the GST component, and shift it in one transfer at the end of the day rather than doing it payment by payment.

Step three: automate the transfer where your revenue allows it

If your income is fairly consistent week to week, set up a recurring transfer into your GST account based on your average weekly revenue. This does two things. It removes the decision entirely, which matters on a quiet week when the temptation to "borrow" from the GST account to cover payroll is strongest. And it means that by the end of the quarter, you are often sitting in credit rather than facing a bill you were not prepared for.

Step four: pay the ATO directly, as often as you can

Get the BPAY details for your specific GST account and set them up once in your banking app. Once that is done, paying the ATO directly takes about thirty seconds. You do not need to wait for the quarterly business activity statement to make a payment. If you are disciplined about moving GST out of your operating account, there is nothing stopping you from sending it to the ATO the same week you collect it.

Step five: treat this as non-negotiable, not optional

This is the step that actually determines whether the system works. General interest charges on ATO debt currently sit around 10.65 per cent, and since 1 July 2025 that interest is no longer tax-deductible. A business carrying $200,000 in ATO debt is losing over $21,000 a year in pure, non-deductible cost, money that buys you nothing, fixes nothing, and simply disappears. The GST portion of every invoice was never yours to spend in the first place. Treat it exactly that way, every single time, and you remove yourself from the 65 per cent of small businesses currently carrying ATO debt they never needed to carry.

Frequently asked questions

How much of the ATO's total debt book is owed by small business? Approximately 65 per cent of the ATO's collectable debt is owed by small business, out of a total debt book that has grown to more than $105 billion.

Is interest on ATO debt tax-deductible? No. General interest charges on ATO debt, currently around 10.65 per cent, are no longer tax-deductible as of 1 July 2025, making unpaid ATO debt a pure, non-deductible cost to the business.

What is the simplest way to avoid falling behind on GST payments? Separate the GST portion of every invoice into a dedicated account as soon as payment is received, rather than waiting until the end of the quarter, and pay it to the ATO directly using BPAY as regularly as your cash flow allows.

Sources: Australian Taxation Office debt figures via Thinkwiser, "ATO Debt $105 Billion: Small Business Tax Gap & Enforcement Guide," 2026. General interest charge rate and deductibility changes as published by the Australian Taxation Office, current as at 2026.