Using Business money for personal purposes

Using business money for personal purposes?

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Are you using business money or assets for private purposes?

Using money or assets from your company or trust for private purposes can have tax consequences if you don’t account for these transactions correctly. That’s why it’s important to get it right.

Business money and assets that you can use for private purposes include:

  • salary and wages
  • director fees
  • fringe benefits, such as an employee using the company car
  • dividends paid by the company to you as a shareholder (i.e. distribution of the company’s profits)
  • trust distributions, if your business operates under a trust and pays you as a beneficiary
  • loans from a trust or company
  • ad hoc drawings or takings
  • allowances or reimbursements of expenses you receive from a trust or company.

If you’re spending money from a company or trust outside of the above examples – then it is shown as a loan to someone related to the officeholders/shareholders of the company.  If the loan hasn’t been repaid by 30 June then it must be reported to the ATO via the tax return.  The owner of the loan then must repay the loan or put the loan on commercial loan terms prior to lodging the next tax return.

Paying rent for a shareholder or another bill, the use of company assets, also have special treatment.  If the company isn’t registered for Fringe Benefit Tax (FBT), the ATO can go back indefinitely in a review.

Remember, there are different reporting and record-keeping requirements for each type of transaction. It’s important to make sure you know how to keep accurate records.

You can also practise good record-keeping habits by regularly cross-checking your records against their original documentation. This allows you to fix mistakes earlier and track your business’s cashflow.

If you still have questions, don’t hesitate to contact us at STS Accounting.