Pay for Business Transactions with Personal Credit Card

[TheMarcx3]

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Good Afternoon,

I’ve just registered my own Pty Ltd company two weeks ago with the aim of starting a small reselling business.
One of the questions that I have come across is around paying for Business Expenses with Personal Credit Cards.

I was under the perception, when I pay for something that is for my business with my personal credit card, that I would have to transfer the amount from the company bank account to my personal bank account.

I just spoke to a good friend who has had his own Pty Ltd for a while and he told me, most of the time he pays for business expense with the personal CC and doesn’t transfer it back.

If I don’t transfer it back, wouldn’t this mess up the company’s balance sheet?

e/ On another note, my wife and I (both directors) aside from putting the money for our shares in the Pty Ltd, also transferred some money as ‘equity’ into the company bank account. I believe there is no issues with that?

What is the story here? Anyone that can shed some light on this, please?

Regards,
Marc.

• This topic was modified 1 month, 1 week ago by TheMarcx3.

[Paul – FS Concierge]

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Hi And Welcome to Flying Solo Marc. It is great to have you!

Thank you for joining our community and posting.

These are the types of questions that can have on-going accounting and tax implications so it really is in your interest to get some professional Accounting advice.

Good luck with the new business.

Cheers
Paul

[TheMarcx3]

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Thank you very much for the response, Paul.

At this point I am looking for personal experience from other business owners. As a matter of fact, same expenses (such as incorporation) seem to be impossible to be paid with the business account as this usually is created only after.

Hence my question to the forum, how do/did YOU handle this?

Thanks heaps,
Marc

[Paul – FS Concierge]

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Fair enough.

I list the money going into the business account as “Capital Introduced”
I would advise you to create a separate account code for it and bring it to the attention of your Accountant.

Same if you did something like ASIC Setup Fees or similar – separate account code, notify Accountant.

Overall, it is far easier, cleaner and less prone to (possibly grievous) errors if you separate everything.

I can’t emphasise enough, that there are some mistakes that are possible to make in accounting that can’t be undone and that can have long term and negative implications. And that’s why I recommend seeing an Accountant ASAP.

Cheers
Paul

[David Baker]

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I would keep everything separate.

I know that BOQ has a business account debit card. (They don’t have credit cards for businesses). My account keeping fee is $10/mo. I don’t recall the cost of the debit card, but it wouldn’t be more than $1/mo.

I’m very careful to keep all of this separate, so I don’t run into any issues. One of my business advisors suggested that if I couldn’t get a credit card in the business name, that I just get a personal one for businesses expenses and I only use it for business expenses. That could be another option. Either way, some credit cards may have a company name on them, but for some of them (namely AMEX) the person named on the card is the one ultimately liable.

If this isn’t done right, you could get charged FBT, which is a PITA. As directors, you should be paid franked dividends from your shares, not wages. This is what I will do when I upgrade my business to a PTY LTD by the end of the financial year.

[Helen Gaffney]

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I would keep things separate.

If you pay for everything in the company, with a company account you know actually the financial position of the company and you don’t have a chance of missing any expenses from a profit and Tax perspective.

If you mix personal with business, things become clouded and expenses for the business have a high chance of being missed, so you will not have a true picture of what is happening in your business.

Why make business more complex than it needs to be?

[BrianDu]

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To echo what has been said before, you really, really need to see you accountant or tax specialist. Repayment of the credit card debt, despite it being for a legitimate business expense, will, in all liklehood be regarded by the ATO as income in the hands of the recipient and therefore taxable as income for the recipient.

SEE YOUR TAX SPECIALIST.

[HERO.WORK]

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Option 1
In Xero, you might choose to reconcile with an account such as:
Director’s Own Funds Introduced (Director’s name here)

Option 2
Treat it as an Expense Claim. Possibly the best option if you are not company director.

Best option
Use a company card, don’t mix it. Shameless plug: I work for budgetly.com.au and we provide employee cards with spending rules.

(Of course, this is just a generic advice, speak to your accountant.)

[JT]

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Hi Marc,

I too use a personal cc to pay business expenses. However, every such transaction is recorded on a database including images of tax invoices. Once a month my Pty Ltd will reconcile this by totalling up the past month’s expenses and making a payment back to my personal bank account.

I run a solo consultancy, so I don’t have too many expenses, and the main motivation for using the personal CC is low bank fees, interest free period and ability to earn cc points.

One thing to watch out for if you’re registered for GST is the GST component of your expenses may need to be recorded separately. As repeated already, talk to your accountant.

[TheMarcx3]

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Dear Everyone,

Thank you very much for all your kind responses.
I’ve found an accountant and had a discussion with him today, going through the above and all other questions I had.

I will stick to him for Financial Statements and Tax Return, too.

Thanks to everyone for sharing their view – I will keep everything seperate and if required reimburse myself for any business expenses paid with personal credit cards.

I am still awaiting the arrival of my CBA Business Debit Card.

[wanderer55]

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Definitely have a conmpany credit/debit card. Mine costs $60 per year, (@ $5.00 per month.) I keep my personal card in one side of my wallet, and the company card in the other side of my wallet, because in the early daza, I was unintentionally using the wrong card.

[psgroup]

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That you should not do, paying business expenses from the personal credit card.
Such all payments come under business capital.
You should be aware of that, confirm with your accountant and update your business capital whatever you incurred from your personal credit card.

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