From the desk of Sonia Gibson
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Pitfall Of Transferring Surplus Business Cash To A Personal Offset Account
It has been a common practice of business owners, operating through companies, to transfer surplus cash into personal mortgage offset accounts. Then at the end of a financial year transferring the cash back into the business to avoid the consequences of Division 7A (i.e. the funds being treated as an unfranked dividend in the hands of the recipient), before transferring it all back to the offset account in July.
The Problem With Leaving Profits In Your Company
One of the really attractive things about companies is that profits are taxed at 26% if they meet certain conditions (if the company is trading and aggregated earnings are less than $50m per year they will qualify). It gets better still on 1 July 2021 where the rate drops to 25%. That’s a massive 22% saving in tax (and Medicare Levy) if you are in the highest marginal tax bracket. Once you earn more than $45,000 a year, where the marginal tax rate changes to 32.5%, there’s a real incentive to keep your money tucked up in your company so you don’t lose a big chunk to the taxman.
Sonia Answers FAQ Around Business And Accounting
As with any industry, we get our fair share of questions. With so many other areas of business being easy to manage yourself, accounting tends to look quite daunting. Our best advice for new entrepreneurs who want to get started with a solid foundation is to work with your accountant. You don’t need to figure it out by trial and error on your own, this can lead to some expensive learning curves! Your accountant is there to work alongside you so that you understand your business’s finances and feel empowered to make the right decisions. Here are some of the most common questions we are asked.
FAQ: Can I DIY My Company Set Up, To Save Myself Some Money?
In short, yes, you can set up your own company…BUT doing a Google search and asking around in a few Facebook groups is not going to equip you with everything you need to know to set your company up right. Having started a business from scratch myself I appreciate that every dollar spent is precious and that you do what you can yourself to save money. DIY’ing your company set up is not something that I would recommend. Not knowing what you don’t know can be very costly and here is why.