2 steps to take
If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences.
That’s why it’s important to get it right.
Business money and assets you take or use for private purposes can include:
- salary and wages
- director fees
- fringe benefits, such as an employee using the company car
- dividends paid by the company to you as a shareholder (that is, distribution of the company’s profits)
- trust distributions if your business operates under a trust and pays you as a beneficiary
- loans from a trust or company
- ad hoc drawings or takings
- allowances or reimbursements of expenses you receive from a trust or company.
If you’ve used business money or assets from a company or trust for private purposes, follow these steps to avoid unintended tax consequences:
- Keep accurate records of the transactions, and
- Account for the transactions in the company or trust tax return and your individual tax return, if applicable.
Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.
You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cash flow.
Taxpayers are ultimately responsible for keeping business records and what you claim in your tax returns, however Registered Tax or BAS Agents like Allan Hall on the Northern Beaches can help and advise on your tax.