You are required to report money and assets taken from your trust or company as income on your tax return. You will understand how money taken out of your business, or using business assets for personal use, must be reported and recorded for tax purposes. It applies if you are an individual who is:
- a director, employee, or shareholder of a company that runs a small business (your business)
- a trustee, employee, or beneficiary of a trust that runs a small business (your business)
- a director of a corporate trustee for a trust that runs a small business (your business)
- or has been an associate of a shareholder (entity or individual) of a private company (an associate can include a partner, spouse, relative, or another entity controlled by a shareholder).
To manage these types of matters, you can seek help from a trusted accounting firm Melbourne to ensure you stay on track and compliant with the ATO.
How Do You Use Assets or Money from a Trust or Company?
The most common ways you may use or take money or assets from a trust or company are:
- wages and salary
- fringe benefits, such as an employee using the car of the business
- directors’ fees
- dividends paid by the company to you as a shareholder (a distribution of profits of a company)
- trust distributions by the trust to you as a beneficiary
- loans from the company or trust
- allowances or reimbursements of expenses received from the company or trust.
There are record-keeping and reporting needs for each of these types of transactions. To ensure accurate record-keeping, you can opt for bookkeeper services Melbourne.
How Can You Record and Report the Use of Your Business Assets or Money?
You need to maintain the right records that explain financial transactions where you have:
- taken assets or money from your business
- used the business’s assets for personal use.
Wages, salary or directors’ fees
You can be a director, employee, and shareholder of the company that runs your business. You can also be a trustee, employee, and beneficiary of the trust that runs your business. You need to include any wages, salary, or directors’ fees you receive from your business as assessable income in your individual tax return. The trust or company that runs your business can typically claim a deduction for wages, salaries, or directors’ fees paid if it complies with the Pay As You Go (PAYG) withholding and reporting obligations for each payment. Your business should:
- register for PAYG withholding and withhold an amount from wages, salary, and directors’ fees
- report PAYG withholding information in its BAS
- report the payment information to the ATO using STP, unless covered by an exemption or deferral
- pay the amount withheld to the ATO and make employee superannuation contributions to a complying super fund by the relevant cut-off dates. To ensure you are dealing with tax matters accurately, whether it is related to tax return, FBT lodgment, or any other tax affairs, consider contacting a tax agent. If you are looking to lodge your tax return, you can also engage a tax return accountant.
Fringe benefits and allowances
Fringe benefits tax (FBT) may apply when an employer (for example, a trust or company), offers benefits to its directors, employees, employees’ families or other associates. These benefits can include a payment or reimbursement of personal expenses or being allowed to use the assets of a business for personal use, such as the business’s car. Your trust or company:
- may be liable to claim a deduction for the expense of offering fringe benefits
- may be able to claim GST credits for goods offered as fringe benefits
- must file an FBT return and pay any FBT applied to the fringe benefits offered to the employees or their associates
- need to keep all records associated with offered fringe benefits, including how the taxable value of benefits was calculated.
Conclusion
The blog shares information on using business money for personal use, along with the data you need to report. If you are looking for help to deal with such type of matters, you can seek help from Reliable Melbourne Accountants.