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November 30, 2020 at 1:12 am #1000481
My company (sole director/member) has just become profitable. The PSI rules don’t apply, so I’m not forced to draw a salary. What’s the least effort way to get the money out of the company, without being double taxed? Here’s the options I know:
- Pay myself a salary – cons: super, PAYG, employment agreement
- Distribute franked dividends – cons: i don’t know what paperwork i need but seems like more effort
- Distribute unfranked dividends – cons: i don’t know how to avoid being double-taxed
- Have the company buy-back my shares – cons: i don’t know how to avoid being double-taxed
- Pay for personal expenses directly – cons: attracts fringe benefits tax, well above my marginal tax rate
I don’t mind if I’m paid this year or next year, but I’d like to have enough information to decide this year. I don’t have an accountant or tax professional as I strongly prefer to do things myself.
Do people have any good/bad experiences with getting money out, and how did they do it?December 6, 2020 at 10:15 pm #1224531jayen, post: 271517, member: 54988 wrote:I don’t have an accountant or tax professional as I strongly prefer to do things myself.
Curious how much time do you spend trying to learn the nuances of each piece of this legislation only to at best partly understand how to navigate the optimal path? If you are an expert on those items in your profile sig then I would have thought your time is worth $100 per hour or potentially a lot more – so it seems like a relatively poor financial decision.December 7, 2020 at 12:50 am #1224532JamesMillar, post: 271538, member: 5318 wrote:it seems like a relatively poor financial decision.
Correct. It certainly seems like a poor financial decision. My decision isn’t based on financials, primarily. Too many bad experiences with professional services that have ended up costing more in time, effort, and stress; than learning about it and doing it myself.
I would rather do it myself sub-optimally, or even incorrectly, than have someone else do it for me, even if the other person’s services were offered for free.December 7, 2020 at 2:27 am #1224533jayen, post: 271539, member: 54988 wrote:I would rather do it myself sub-optimally, or even incorrectly, than have someone else do it for me, even if the other person’s services were offered for free.
That’s an interesting decision-making model – hopefully not the same you apply in your IT projects for others.
I might also add that the ATO doesn’t offer a DIY “close enough” concession so be mindful of that as well. If you think accountants are frustrating I can assure you that a four-year ATO income tax audit is considerably worse. The burden of evidence/proof is reversed under Australian Tax Law so when the Commissioner (audit case officer) makes a decision then it’s up to you to succeed with a formal objection and prove you are correct not vice versa.December 7, 2020 at 3:30 am #1224534bb1Participant
jayen, post: 271539, member: 54988 wrote:Correct. It certainly seems like a poor financial decision. My decision isn’t based on financials, primarily. Too many bad experiences with professional services that have ended up costing more in time, effort, and stress; than learning about it and doing it myself.
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I would rather do it myself sub-optimally, or even incorrectly, than have someone else do it for me, even if the other person’s services were offered for free.
I agree with your sentiment, about bad experiences with ”professionals”, I now do my own book keeping after an extremely bad experience, from someone I should have being able to trust 200%, but I still use an accountant for all the important things.
BUT, you dont trust professional’s, but you will come to a forum for your advise, now that is the absolute worst business decision you can make. You basically get what you pay for on a forum, zero dollars in, means most likely sub optimal advise ([USER=5318]@JamesMillar[/USER] excluded from that comment).December 7, 2020 at 3:31 am #1224535JamesMillar, post: 271540, member: 5318 wrote:That’s an interesting decision-making model – hopefully not the same you apply in your IT projects for others.Surprisingly (or unsurprisingly), yes. I’ve only just started subcontracting this year, but I’m checking all the work that my subcontractors are doing, to ensure the level of optimalilty and correctness that I expect from myself. I take full responsibility for the IT projects I do for others.
I do also teach/mentor others in IT, for people who are like me and would rather DIY and get it wrong than let me do it. https://gosupply.com.au/store/ is one such example.
I understand what you’re saying and I know tax professionals are more regulated than my profession, but it also means that tax professionals know how to cover themselves when they make an error, and I’m a little worried about being thrown under the bus.December 7, 2020 at 3:35 am #1224536bb1, post: 271541, member: 53375 wrote:BUT, you dont trust professional’s, but you will come to a forum for your advise, now that is the absolute worst business decision you can make. You basically get what you pay for on a forum, zero dollars in, means most likely sub optimal advise ([USER=5318]@JamesMillar[/USER] excluded from that comment).I wouldn’t blindly follow the advise – that would be the same as letting the professional handle the situation for me.December 7, 2020 at 4:09 am #1224537
Well, I’m not sure how old you are but if you have many years of professional work ahead of you I would encourage you to revisit your position on this at some point. I only hope you don’t mentor to teach any potential budding entrepreneurs those thoughts because they are very dangerous bordering on reckless.
I have met many people (particularly from IT) that are technically minded problem solvers (in their field) that try to extend to solving complex technical issues well outside their domain. I think some part is because they have a curious mind (good) and other times its hubris because they are good at what they do so they are good at everything (bad). What is remarkable about your case is that you so openly state that you would rather be incorrect and get your taxes wrong (and deal with those potentially significant financial consequences) than hire a professional accountant or even get free advice from a professional. Either way, the probability of you doing a better job of it than a true professional accountant (not sure what your version of that is) is very low and the amount of time you spend goes some way to indicating how you value your time.
If you are teaching others about anything to do with business and projects then you should be teaching them the importance of leveraging resources. You aren’t going to get far micro-managing and second-guessing every conceivable issue so at some point you need to leverage resources and trust they are doing their bit. If you have already given up on that concept then you are destined for inefficient outcomes for all but the simplest of operations and projects.
But if nothing else you are very honest. Well done for that.December 7, 2020 at 4:45 am #1224538
Thank you so much for your honest feedback and advise. (Not sarcasm)
While I do share my experiences with others, I try to stick to teaching only IT and not about life or business. I also try to stick to the facts and not add in my heavily biased opinion. Definitely I would not tell you how to do your job (unless you’re working on my behalf for one of my clients). Even for my clients I make tables of pros and cons and help them make an educated decision, because ultimately they foot the bill and need to know their options.
Certainly for the GoSupply site, I keep encouraging him to use an off-the-shelf e-commerce product, or let me at least have access to help him, but he’d rather spend his time and money learning from his own mistakes, than to let me in front of the keyboard. He’s had multiple bad experiences with IT “professionals” and I’ve had multiple bad experiences with regulated, certified professionals. I don’t doubt that the likelihood and severity of an issue are much greater with DIY taxes, compared to a true tax professional. I guess I value my time to explore my curiosity (and have this conversation about it) more than I value my time to earn money. We’ve all got different values and mine isn’t on the efficient side. (I won’t lie – there is a bit of hubris there, but there is also a point where I will pay for advise.)
I did say before that I’m checking all my subcontractors work, but that’s not 100% accurate. The amount of my checking has decreased over the year, more for some than others, but I find peer review is still important, so all the work is at least being checked by someone before being delivered to clients (or clients’ clients, depending on the situation).JamesMillar, post: 271544, member: 5318 wrote:But if nothing else you are very honest. Well done for that.
Yeah, honest to a fault. I’ve been called “too honest” as well. It’s more of a curse than a blessing. Maybe it’s the root issue of why I DIY.
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