"Nobody told me I can't take money out of my company"

And so they did.

Over $140,000..!

To do a renovation on their home. They simply took the money out.

But here’s the thing…It wasn’t their money.

That money belonged to the company.

So, let's be really clear...

There are only three ways you can take money out of a company.

1. As Wages, or Directors Fees.

Withhold PAYG and pay Super on these amounts.

2. As a Dividend.

Paid from retained earnings, with franking credits, so you get the benefit of the tax the company has paid previously.

3. As Repayment of a Shareholder Loan.

This one really only works if the company actually does owe you money. 

- If you owe the company money (i.e. through a Directors Loan Account) it will be;

•  Caught under Div 7A of the Tax Act,

• Nasty tax treatment applies. 

In which case, see 1 or 2 above, or put in place a complying loan agreement with repayments, etc.

Proceed with caution

The ATO is looking closely at the way business owners take money out of their company, so treat this issue with the respect it deserves.

Let me know if you need a hand, or would like to discuss your situation.

See more about Peter HERE