If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences. That’s why it’s important to get it right.
Business money and assets you take or use for private purposes can 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 (that is, 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’ve used business money or assets from a company or trust for private purposes, follow these 2 simple steps to avoid unintended tax consequences:
- Keep accurate records of the transactions.
- Account for the transactions in the company or trust tax return and your individual tax return, if applicable.
Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.
You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cashflow.
Take a look at these examples to check if you’re reporting business money or assets used for private purposes correctly.
Our team are here to help you with your tax, but you’re responsible for keeping business records and what you claim in your tax returns.
If you need more information this tax time, download and print this handy fact sheet (PDF, 225KB)This link will download a file.
Source: ATO Newsroom
