How to pay 70c in the dollar taxation in Australia.

This is a warning of getting your info right before moving money around.
This is what I did.
Charge trading company $1,000,000 to put money in investment account
Tax payable was $300,000 company tax, $60,000 payroll tax
Later, you need that $700,000 for personal purposes so draw as unfranked dividend and pay 48.6% tax on the unfranked dividend.
Result is over $700,000 tax on the original $1,000,000.

DONT DO WHAT CARTART DID!

 

Could you have loaned the money to the company to put in investment account? Pay no company or payroll tax as it was a loan.

When you required the funds back for personal use, the company repays the loan and no personal tax is payable?

 

Ohhh.... somehow I thought the thread was how to pay 30 cents in the dollar tax.....

 

I dont understand the flow ?

You wanted to use company profits to invest funds ? Or you wanted to inject funds into the company ? Why did you invoice from it to you ? You could have lent the funds to the company ? And then it repaid it to you. Would have been zero tax to pay.

Why didnt you setup a new company and lend money to the new company ? Division 7a wouldnt apply.

Or use a 122a rollover to transfer shares (assuming they are held in your name) to a new company and pay out a dividend to the new company shareholder and invest those funds through new co ? No top up tax.

Why did you pay an unfranked dividend when you had franking credits ?

Did you discuss potentially putting a complying loan agreement in place and spreading payments over 7 years if you need 700k personally ?

Did you seek advice ?

Unnecessarily paid that tax.

 

I would say “No” .

If the answer is “Yes”, then don’t pay their bill, report them to the RC, sue them, ...

 

The majority of our clients pay an average 30% tax over the group. Most are business owners. PAYG are generally the greatest contributors to the tax base.

 

What does this even mean? Why didnt you just lend money to the company?

 

If company tax has already been paid, why is it an unfranked dividend?

 

No I did not get advice until it was too late.
Company tax paid by company a is not a franked in company b.
Loans would not work in these situations at the time.

 

Sounds like was structured badly and advice never sought. You should never have paid 60c in the dollar.

Lesson learned dont do your own brain surgery in the garage

 

What can one say?

If this is the advice you are getting, I would suggest changing advisors.

Please explain.

 

Some of the wealthiest people are the most stubborn and wont listen.

Others seek advice all the time.

The latter pay for advice and structure things accordingly.

The former complain.

 

I don't think @Car tart is complaining. He's readily admitted that he made a mistake.

 

Sorry i wasnt saying cartart is in that boat. Just a general statement.

 

Wow you want me to go deeper.

1 the transfer of tax paid money from a to b was unused cash to start a new business by a second company that I own using tax paid money by my first company.
2 without notice I was audited by the NSW OSR. She claimed that moving money from A to B was me trying to avoid paying payroll tax. As it should have been a loan, but it was too late and so I had to pay payroll tax plus penalty for not paying it.
3 all the accountants I spoke to said she was wrong and the OSR said she was wrong. I asked for reconsideration and the same lady came and told me the same thing. But offered me no penalty if I pay the payroll tax deemed to be due.
So I paid and thus started the problem.

 

Could co a have paid a franked div to you, then you lend to co b?

Theres a lot of info missing.

 

Some clarity would be good .

From what I can understand from your posts:

1. Company B charged (I assume you mean invoiced) Company A $1M when no product or service was provided. So, on the books, B received income (P&L item) instead of capital (Balance Sheet item). Hence, tax is payable by B. This is a very basic mistake - why would you do that?

2. Company tax is paid on income - expenses. For B to pay $300,000 in tax, B must not of had any expenses. Hiw did you achieve that?

3. Then B declares and pays you an unfranked dividend (to be used for personal purposes) when it has paid company tax of 30%. This should have been a fully franked dividend and you should have claimed the $300,000 imputation on your tax return. This is a pretty stupid mistake - why would you do this?

4. Payroll tax is paid on wages/salary paid to employees. If all of your advisors and the OSR said it wasn’t payable (except one person), why would you pay $60,000 in payroll tax when it wasn’t due.

I suppose the good news is that the amounts involved are quite small so no real harm done. I would take all of the above as a low-cost lesson in accounting and finance.

You gotta be making this up. My four year old granddaughter wouldn’t have made the above mistakes.

 

There is a difference between warning people to be careful driving because some people are unpredictible, and warning people not to drive a ferari with the top down, without seatbelts or lights on a rainy night.

 

Funny thing is I’m not complaining, I’m not lying, I’m not holding back.
I’m just letting people know that you can sometimes get yourself into trouble.

Hindsight is a wonderful thing and unfortunately I don’t have a 4 year old grand daughter who can explain the consequences of intercompany transfer effects over a 4 year period on payroll tax.

It’s done, I’ve learnt, I still don’t know how to fund a new corporation without putting together a loan.

 

If you are going to tell a story, at least be consistent .