I'm somewhat confused about the income tax I will need to pay as a sole trader.
I Am currently employed full time and am aabout to launch a small local shop to earn some extra income, selling various goods, before commencing I will apply for an abn.
I want to keep some of the profits I make from sales in my business account to cover any unexpected expenses that may arise.
Other monies will be set aside to pay tax, GST, stock and overheads etc.
I know I will have to pay income tax on the drawings I make to my personal account from the bususinss but will I need to pay income tax on the profits which stay within the business?
For example. If I sell $5000 of stock in 1 month and my product costs, tax, GST ECT add up to $1000.
I'm left with $4000 in profit for that month. I then draw from the business account $2000 in that same month into my personal account and leave the remaining $2000 in the business account to cover potential slow months, market shifts or something else unexpected.
Will I need to set aside income tax on the $4000 total profit or on the $2000 drawing made from the business?
This is likely to be a small micro business and not reach GST thresholds.
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