How to get funds from Business ?

Hi guys,

Not really a property question, but property could be an option in this situation.
I have a business which has been accumulating decent profits and am thinking of options on how to get this money out of the business the most effective way.
My wife and I pay ourselves a decent salary, but apart from that, all profits are staying in the business account and growing continually.
Don't want to, or need to invest any money into the business, so what options do we have?

Just pay ourselves more and pay a large personal tax bill?
Invest through the business, but confused about tax issues later, as may not keep the business after 2 or 3 years.

Any other options?

Basically want profits into our personal names while minimising tax...
Is there a way?

Thanks for any helpful advice.


Spider
 
Hey Spider,
We are in exactly the same situation :) (Hard isn't it :) )

What we have decided to do is buy premises for the business to trade out of. (Kind of makes sense doesn't it :) Why pay rent to some Comm Investor :) sorry Dazz :) )

What type of business do you have? Is this a feasable option for you?

One other option (make sure you talk to your accountant) is to funnel profits into a SMSF and buy proerty out of that.

good luck
 
while we had our business actively working we just took the highest wage needed to fund our investments. now we still have the company but not the business but we use the money that was left in the company for our share trading (not investing) and we still draw a wage from that.

A good accountant is worth his weight in gold!:)
 
Hi YA's have you read "the richest man in Babbylon" "SPELL"
Please note the core rule is placing 10% aside into an entity that enables it to also grow and prosper , allowing you to not have to work eventually and recieving the same, similar income, as your buisiness relys on your work , if this was to stop does your income ???
others place the funds into property and years later own premises it becomes a nest egg and allows you to sell /lease, later, haveing paid off the premises also allows for more income giving you operunitys out weighing your compeditors, ie nil rent topay,
I thing you should always look at a small buisiness as a cash flow entity to allow you to contribute to paying and owning land,house and or the premisses,

say for eg, buying a resteaurent, and paying rent ie 2k month, forever or you buy the premises, and pay the payments allowing the capital growth to take the resteaurant to the next stage, :D

crap spells sorry?
 
Ideally you would have the shares of the company owned by a discretionary trust and then you could make a distribution to the trust. from the trust you could distribute to various family members on lower incomes or to another company where you can store it for later use.

You wouldn't want to accumulate money in the trading company as it is risky - if the company were to go down you could lose the lot. For the same reason you should never buy property in the same company.

if you own the shares personally you can always pay yourself the maximum until you start paying more than 30% tax (then it is more tax effective to leave it in the company). Look at super, look as employing other family members on lower incomes, set up another company and give it some work, set up a trust to own equipment and then rent the equipment (also works with intellectual property) etc
 
sorry terry, but super sucks, you can't get it as easily as you put it in , My understanding is once yo nominate your own super funds it gets all tied up with laws,
 
Options include:

- paying a dividend out of the company to yourself, and you get the franking credits, and depending on your income you pay top up tax (e.g. if your income is in the 46.5% tax bracket, you get can get 30% credits from the company (where dividend is fully franked), and pay another 16.5%).

- Borrow from the company and enter into a formal agreement with the company to make minimum yearly repayments (minimum interest rate given by the Australian Taxation Office) - I suggest you read up some fact sheets on whats called the Division 7A on the tax office website.
 
Not too sure, but couldn't you pay yourself a wage (as you already are) and also pay a director/s fee (you are the director) of the trust that the company is under?

Regards
Marty
 
Our accountant says that leaving the profits of the business in the business without drawing back the tax paid as dividends, is like giving the Tax Office a free loan! :eek:

We do what TerryW advises and distribute to family members; although we still have over $80k of franking credits left in the Company as we had a few really good years. So now we pay ourselves a combination of wages and dividend payments and hope to dwindle this down just in case Rudd decides to get rid of franking credits. Another :eek:

Also, if there is spare cash in the business, as long as it is put back into the business account before June 30, we put excess money into our personal mortgage offset account which reduces the interest we pay on our Investment mortgages. That way, the business still has access to the money if needed; we dont pay tax on any interest earned and our interest paid through the mortgage is slashed.
 
Mr Rudd wont get rid of franked divs for micro and small business...........imagine the fun when after some years of toil and risk you start making some decent dough, you start paying > 70 c in the dollar income tax above the top personal threshold.

Except for the huge amount of unemployment it would create for a while, a single rate tax system across all entities and incomes, with rebates and support for those that cant afford it, could be nice incentive for people to take risk and work harder/smarter.

ta
rolf
 
Mr Rudd wont get rid of franked divs for micro and small business...........imagine the fun when after some years of toil and risk you start making some decent dough, you start paying > 70 c in the dollar income tax above the top personal threshold.
ta
rolf

Well Rolf, I would agree with you that it wouldnt make sense to do that, but, well, since when has that logic determined what the Government decides.

But yes, the accountant said pretty much the same thing, but just in case....we will ease the pain a little. Amazing how paying yourself in part dividends helps the cash flow - reduced workcover levy, reduced Super bill, reduced PAYG instalments, reduced payroll tax. It just gives us many more options in which to place our money.
 
Guess it depends on how you are structured. By the sounds of things setup as PTY LTD with individuals as shareholders? Not the ideal way to be setup. Terry touched on some good points so you could look at selling some of the shares to a DT for some more flexibility in income streaming.

Basically want profits into our personal names while minimising tax...
Is there a way?

No easy way out of that. If you want profit in YOUR personal name, there is no magic way to minimise tax. Best thing to look at would be streaming to other people / companies who pay a lower rate.
 
There is a different way, it's called planning ahead.
Plan for your profits (and losses), plan for your expenses, plan for your capital expenditure and plan for your wages.
Both personal and company, before the financial year.
It's now october, your 09 fin yr should be finalized and put to bed while your executing the plan done in may for 09/10.

good luck
 
Our accountant says that leaving the profits of the business in the business without drawing back the tax paid as dividends, is like giving the Tax Office a free loan! :eek:

We do what TerryW advises and distribute to family members; although we still have over $80k of franking credits left in the Company as we had a few really good years. So now we pay ourselves a combination of wages and dividend payments and hope to dwindle this down just in case Rudd decides to get rid of franking credits. Another :eek:

Also, if there is spare cash in the business, as long as it is put back into the business account before June 30, we put excess money into our personal mortgage offset account which reduces the interest we pay on our Investment mortgages. That way, the business still has access to the money if needed; we dont pay tax on any interest earned and our interest paid through the mortgage is slashed.

Do you have loan agreements otherwise you could be sailing close to a deemed dividend
 
Do you have loan agreements otherwise you could be sailing close to a deemed dividend

The loan is paid back within 12 months, prior to each financial year. The accountant said this was fine - although last year I mucked up one of my repayments so that was accounted for as a dividend.
 
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