Home – New Forums Money matters Start up costs and paying them back…

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  • #979399
    GuesthouseJo
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    I’ve never done any accounting studies so as much as I am okay with the day to day stuff in MYOB I have a question about the money I put into the business and paying it back…

    I put in about $20 000 to the business. Some of this was spent on buying furniture for my guesthouse, linen, crockery etc plus an old van. The rest was on things like delivery fees for the furniture, painting the guesthouse, consumables like toilet paper,cleaning products etc.

    From the start the property has been fully booked so now with the money coming in the first thing I want to do is pay myself back! Can I take $20 000 out as owners drawings and have that not count as income that has to have tax paid on it? Or can I only take part of it out – the amount spent on consumables and maintence etc as the rest was spent on assets that I still have?

    If anyone can point me to any good sites for basic accounting that would be great also. Or any recommendations for micro business accountants – can be anywhere as I don’t need to see them in person really.

    #1114016
    Anonymous
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    Hi again Jody,

    I’m not the right person to advise you on the financial stuff, but hopefully someone who can help will be along soon.

    In the meantime, you may like to check out some of the accountants in our directory.

    All the best,
    Jayne

    #1114017
    Paul Wineberg
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    Hi,

    The $20,000 that was originally put into the business could be treated as a loan. Therefore this is money that is owed back to you personally. This needs to be accounted for correctly in your financial statements, but this $20K that you draw back down would not be seen as personal income, but as a repayment of a loan.

    I run an accounting firm in the South East of Melbourne, but we have clients Austraia wide. We specialises in Small Business Entities. I would be happy to discuss this matter with you further. PM me your if you would like me to give you a call.

    Regards,

    Paul

    #1114018
    apj
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    Hi Jo,

    You should be able to draw your $20,000 back out of the business without tax consequences. It might depend a little on your trading structure and what else you have going on (company vs. partnership vs. trust vs. sole trader) so I suggest finding an accountant and talking to them.

    As mentioned above, it will likely be classified as a loan to the business, or possibly owner’s equity if a sole trader / partnership, both of which can be repaid without any problems. In fact the only kind of trading entity which might cause problems when trying to extract cash is a Pty Ltd company due to a (very annoying) anti-avoidance rule called Division 7a.

    In your accounts I recommend you post the drawings to the same account you used to post the cash you initially injected into the business. Also consider doing some journal entries to take up any costs you paid on behalf of the business in the early stages where the actual funds didn’t go through the business bank account. This will increase the amount you can draw back and give the business a better tax outcome.

    I hope this helps!

    Aaron

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