Offset account using Business funds

Discussion in 'Accounting & Tax' started by Dsign, 5th Jun, 2019.

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  1. Dsign

    Dsign Well-Known Member

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    Hi,

    My accountant hasn't got back to me so thought it would be a good opportunity to ask.

    If i put my cash sitting in my business account into my investment offset acccount does this affect my tax situation?

    I intend on letting it sit in there for a few months and transferring it back when need be to reduce the balance.

    Any advice would be appreciated thanks
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    by business do you mean company?
     
  3. Dsign

    Dsign Well-Known Member

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    Yes, i have a PTY LTD company
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    In that case the money is not yours so you will have to consider the legal implications as well as the taxation implications - it could be taxed as a dividend under Divsion 7A.
    Best not to do.
     
  5. Dsign

    Dsign Well-Known Member

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    Thanks Terry!
     
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  6. MWI

    MWI Well-Known Member

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    Please seek your own advice and confirmation on this from your accountant...but I think you want to do what I do, when we have excess cash sitting in our business accounts, can we utilize it or park it elsewhere?
    I have asked my accountant about parking our Business cash (yes PTY LTD but a corporate trustee for Trusts!) into adult kid offsets where we lent the actual funds to our adult kid for investment (the offsets are actually in our names too as we split the loans into many so a bit more complicated too).
    The response was:
    With regards to the loans to X's offset, you have the option of charging interest but generally we would just leave these as "interest free" related party loans.
    Terry, so why would this be a problem if it is treated as a loan and then repaid back? My question was whether I need to charge the interest on this loan and the accountant said no as we can treat these as 'interest free' related party loans.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Different for trusts as they are a flow thru entity. As long as. No unpaid present entitlements there would be no div7a issues
     
  8. Mike A

    Mike A Well-Known Member

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    If you have an unpaid present entitlement to a company “bucket company” and you do that you have division 7a issues

    In the last month have picked up a bunch of new clients with these very issues. Im amazed many accountants still arent on top of division 7a.

    One we didnt take on as the problem was massive.

    Soon ato will start auditing this area and watch millions of dollars roll in.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes the proposed changes to D7A may become a trap for many
     
  10. Mike A

    Mike A Well-Known Member

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    The proposed changes wont change the current situation described above. Div 7a applies even without the proposed changes.
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The existing Div7A laws are a already a trap for many

    I have a client who moved bucket company funds to a related trust with no paperwork what so ever. He says his accountant said it was fine as there was no tax advantage as all the money ended up in his family hands anyway. No interest was paid to the company either.
     
  12. Mike A

    Mike A Well-Known Member

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    oh dear !!!
     

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