spending 50k on car and equipment for new business legal/tax

Hi All,


Im about to spend about 50k soon as i'll be going from employed to self employed the 50k will be spent on a work car and some equipment. i was originally going to just start purchasing stuff now in my name. But because i will have a company, Should i loan the 50k to begin with to the company and then purchase it through the company?

is there any tax advantages / legal advantages? to doing it this way?


Cheers, Elives

 

Yes I’d do a director’s loan to your company (register for GST) so that way you can get GST refunded from purchases you make.

 

you don't get gst refunded if i purchase in my own name but for the business?

 

I do my vehicle finance through the company, and finance the ex GST amount, pay the GST as deposit, then claim it back next BAS.

If you are paying cash for it, then documented directors loan from yourself to company, company buys, claims GST, and also claims deductions for servicing, fuel, depreciation etc. Loan sits on the balance sheet as a liability.

 

Only an entity with a gst registration can claim the gst.

 

The company should probably own the assets it uses to make money. If you are worried about asset protection perhaps a second company which leases to the trading company. but a car will drop in value so not much of a worry. You could lend the company money to start it off and take a charge over its assets if you wish.

 

so for tax the main pro is you get to claim the gst vs buying it in your personal name.

 

you may not be able to claim any expenses of company assets if you buy them. It doesn't relate to your income.

 

i'm confused. if i purchase in my own name but it's for the business (sole trader just starting out)

i cannot claim the gst on the purchases?

 

Only the GST registered entity can claim GST credits. So if you arent butyour company is, company needs to be the name on the invoice and registration etc.

If you are a sole trader no company, you either register for GST or you dont and have no ability to claim GST credits.

 

If you are a sole trader operating a business and are registered for GST then yes.

But are you?

 

I'm currently employed full time in about 6 months i'm hoping to go out on my own. but need to start buying stuff now. so i'm ready in 6 months. if that makes sense.

Cheers, Elives

 

Well, you should decide on the entity now.

 

I don't think I can think of a reason why you can't set up a company now, loan your personal money to it, and start buying stuff now

You don't have to start the company on the day after you quit full time employment. You can do it now and prepare for the time when you will be working full time in your company.

 

for my industry i'd have to get another license just for the company which costs like 600-1200 p.a

+ the $300 p.a asic fee for the company


just starting out i would prefer to just be sole trader and see how well i go. but i'm not sure on what to do. what is the amount of money per year you would make from business to then go the company road compared to staying sole trader? and if i was sole trader to begin with is there many issues starting a company 1-2 years later? with equipment already been purchased and what not.

 

Hi Terry,


if i had a company structure with a trustee as the director (idk if this is correct)

could the profits then be given out to my sister (50% of profit) and my self (other 50% of profit) as beneficiaries of the family trust. but then in actual fact what happens is 50% of the profit is taxed on her personal tax rates. but the money never actually goes to her? or do i have to physically give her the money?

i'm confused how the trust part of it works as you can tell.. haha

Cheers, Elives

 

A trust may be able to distribute income to beneficiaries. But if not paid out it is an unpaid present entitlement and is a debt to the sister. It should be paid or converted into a loan agreement.

 

i have 230k cash sitting in offset not being used and hasn't for about 1.5 years.
i'm buying 2nd hand van. for 30k brand new are 45k
and 15-20k on equipment so i can charge out a lot higher then most in my industry.



im stuck on what structure to go with. is it ok if i just go with sole trader for first year to test water and then use company structure afterwards? will it all work out the same when it comes to depreciation of the 50k worth of business stuff?

realistically i plan never to go back to being employed by someone i'm 25 and hate working for others.

Cheers, Elives

 

i thought people who used family trusts could just put the income from trust onto lower peoples taxable incomes for tax purposes with out the money changing hands so the main person kept the money but it was taxed at a lower rate. so long as it was family / spouse.


is this 100% wrong? i don't really know when it comes to this but did read trust magic so idk.