Important Tax Issues when setting up a Business Structure
I had a new client this morning (Saturday July 26, 2014); he had to jump the queue because he had set up a company, rather than a trust, in April when his employer insisted he had to. He did not call me first even though he works with one of my clients who told him to. If he had called me I would have told him to set up a discretionary trading trust with a company trustee (the company trustee is optional).
It meant he had until Monday 28th of July to pay super on any wages he had accidentally paid himself, from the company. We had a lot to work out. He used one of my general blank excel spread sheets designed for a small business to input expenses for the company. I had to show him all the excel tips which are already well documented on the internet, you just have to Google them or select help in the software. He had his business kilometres versus private kilometres and starting odometer and closing odometer reading. So we could work out the business percentage of his motor vehicle expenses for the car he purchased in the financial year just gone. For the older car, which he had had for the first four months, we will use cents per kilometre.
All this had to be rushed because he had to pay any superannuation which was owed within 28 days of the end of a quarter. The penalties are severe if you don’t pay by the deadline; you end up having to pay the super and penalties later and none are tax-deductible. I made sure he set up an employer EFT facility with his super fund on Friday, so he could transfer any payment he needed to make. It turned out, that after the expenses which the company could claim had been reimbursed to him, his wages, which were the amount left over, amounted to less than $450 for each month; so no super was owed. Also no taxes on the wages had to be paid to the ATO!
I’m going to work with Alana now to finish the patio this weekend, so I cannot write any more at the moment. I want to offer (to anyone who needs this help) an ATO document I had downloaded about claiming an amount of rent for a home business. I had a client call me while we worked for hours on the company business return, and I had to explain to him that he may not have a right to claim rent, I will eventually put directions for find this on the website www.godgivenwisdom.com.au along with many other tips.