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February 4, 2020 at 6:53 am #1000015rthorntnMember
- Total posts: 20
I’m in a 50/50 partnership, the one thing that is bothering me (and it probably shouldn’t) is how we pay each other early on.
What I mean is it’s the beginning of the partnership so the majority of the business income will go to income for the both of us.
So say we make $25K, $5K is bills, so we divide the remaining $20K 50/50, $10K each, how do we keep track of how much each has spent of their $10K, and make sure one partner doesn’t accidentally spend some of the other partners share?
The way I see it, it makes sense for us to move $10K each into a 2nd and 3rd business bank account, so we can keep track, as maybe I want to get a new laptop or my partner has to pay more tax than me?
I mean how do we withhold our tax properly when we potentially have different tax rates?
Hopefully that makes sense.
RichardFebruary 4, 2020 at 8:10 am #1222316Paul – FS ConciergeModerator
- Total posts: 3,141
Hopefully some helpful members will be along soon with some advice to point you in the right direction.
My view is that the default tax rate you agree on is the lower of the 2, therefore if you each buy a laptop, no one partner is getting a greater benefit than the other.
Trust and understanding are the most important components of these things except… solid Accounting advice.
CheersFebruary 5, 2020 at 9:40 am #1222317JacquiPryorMember
- Total posts: 2,344
Not advice but just reading over your query, I think the issue can be simplified:
a) partnership makes 25k against its ABN (therefore, it’s the total turnover for the partnership)
b) Partnership has X amount in costs/bills etc (e.g 5K)
Therefore profit is 20K – the two of you decide how this is split (hopefully your partnership agreement speaks to this as well). Either, you would (I assume) pay 10K to each of your personal bank accounts as wages/drawings or whatever your account suggests is best – then, you each pay your own personal tax on your respective 10K amounts (which, I assume is at whatever your normal tax rate would be over the financial year) – OR – you keep some in the business account (still connected to partnership ABN) and say pay yourselves 5K each, therefore paying personal tax on the 5K amount each with funds available for the business to spend on laptops or other things it might need.
In short, I think its either ‘business’ money or your personal money that’s been paid to you by the business. So, there shouldn’t be a situation for one to spend the other’s share and realistically neither of you should be worried about the other’s personal tax amounts?
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