Home Forums Money matters Transition from Sole trader to P/L: FTB, CSA, Austudy

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  • #976282
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi,

    I just found this website and think it’s fantastic!

    This year I decided to take a calculated risk because I felt my life was not going anywhere in terms of creating a brighter future for myself and children. I decided to start full time uni and start a business both whilst working part time.

    Some background info:

    My (at home) business:
    *Recently registered business name and ABN as Sole Trader this year
    *Imported kayaks that I organised to be manufactured overseas
    *Selling many of them every week
    *Now looking to create new product lines

    Personally:
    *Single father with two children (shared custody); receive FTB A & B, do not pay child support as my part time wage is under the ‘no-pay’ threshold
    *Work part time
    *Study university full-time; receive Austudy
    *Live in a rental accommodation

    Now, my (sole trading) business is doing really well, income is steadily streaming through. I am looking to start a company (Pty Ltd) to limit my liability in case (God forbid!) of litigation. But also because from what I’ve heard, it can prove quite beneficial for my circumstances, however I really need some advice.

    Apart from limiting my liability to the assets of the company and not me personally, would creating a company also:

    a) affect my personal taxable income, thus;
    a1) affecting Family Tax Benefit part A and B?
    a2) affecting child support

    b) create an avenue to claim ALL or PART of my vehicle expenses, whether personal or business. For example, rego, mechanical repairs/services, petrol, insurance, monthly car repayments (my car is under finance).
    b1) could I sell my car and upgrade to a nicer/newer car and claim ALL expenses on the company even though I would use it for personal useage, for example, driving my children to school, shopping, etc. Is that referred to as leasing?
    b2) allow me to claim ALL or PART of my utility bills through the company, eg phone, gas, water, power.

    I’ve seen websites that charge roughly $650 (ASIC fee + the fee charged by the company who runs the website) to create a company. I’ve gone through the process of entering my details but have not finalised the application as I was unsure if these sites are legit. Any advice on these sites?

    Lastly….
    c) would I become an employee of the company to derive a wage? I assume this affects my personal taxable income? And does this count as a second job thus having to pay ‘that’ crazy tax rate on a second income?
    d) when registering a Pty Ltd, do I need to issue shares? As I went through an online company registration application is asked how many shares to issue. I ended up issuing one share at $1. But as I mentioned above I never finalised the application. I just wanted to get some suggestions/advice first.

    Okay, thats it! I am so sorry for all my ‘newbie’ questions.

    If you can shed some light on even a couple of questions, I would be grateful!

    Thanks,
    Julz

    #1080470
    Anonymous
    Guest
    • Total posts: 11,465

    Hi Julz,

    Thanks for joining Flying Solo, and apologies that your initial post got held up in our moderation queue :(

    Sounds like you are on a huge roll right now – congratulations on your success so far! Lots of questions there, and I suspect that you’ll need to seek professional advice, but I’m sure there’ll be a few folk along presently who can get you started with some general info.

    All the best to you and the kids for Christmas,
    Jayne

    #1080611
    Anonymous
    Guest
    • Total posts: 11,465

    Hi Julz,

    Thanks for joining Flying Solo, and apologies that your initial post got held up in our moderation queue :(

    Sounds like you are on a huge roll right now – congratulations on your success so far! Lots of questions there, and I suspect that you’ll need to seek professional advice, but I’m sure there’ll be a few folk along presently who can get you started with some general info.

    All the best to you and the kids for Christmas,
    Jayne

    #1080472
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Jayne,

    That’s okay about the hold-up :) If I don’t get any replies from my original post, is there are particular ‘type’ of accountant that can handle the nature of my questions? I’d hate to see an accountant then realise they don’t deal with my type of questions! eek!

    Thanks
    Julian

    #1080612
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Jayne,

    That’s okay about the hold-up :) If I don’t get any replies from my original post, is there are particular ‘type’ of accountant that can handle the nature of my questions? I’d hate to see an accountant then realise they don’t deal with my type of questions! eek!

    Thanks
    Julian

    #1080474
    Anonymous
    Guest
    • Total posts: 11,465

    You really need an accountant or lawyer for this: this is not legal advice only personal opinions

    Quote:
    Apart from limiting my liability to the assets of the company and not me personally, would creating a company also:
    a) affect my personal taxable income, thus;
    a1) affecting Family Tax Benefit part A and B?
    a2) affecting child support

    A1) yes, however for the short term maybe for the better. remember that a company pays tax and therefore your personal earnings will be lower (or can be provided you set it up correctly) but will still be taxable.

    A2) these will be affected either way, first way is by the income you give yourself, the second is via the assets test (the company will be an asset which includes all equipment and stock that it retains). Parenting Payment Assets Income assessment family tax fact sheet
    A3) unsure about maybe here

    B) buying a vehicle will affect the asset value of the company, therefore affecting your assets according to centerlink, personal usage of the vehicle is not claimable, and a log would need to kept …. also you incur Fringe Benefit Tax (increases your personal tax rate)…

    AS I SAID YOU REALLY NEED AN ACCOUNTANT TO CONFIRM ALL THESE THINGS PROPERLY…

    #1080613
    Anonymous
    Guest
    • Total posts: 11,465

    You really need an accountant or lawyer for this: this is not legal advice only personal opinions

    Quote:
    Apart from limiting my liability to the assets of the company and not me personally, would creating a company also:
    a) affect my personal taxable income, thus;
    a1) affecting Family Tax Benefit part A and B?
    a2) affecting child support

    A1) yes, however for the short term maybe for the better. remember that a company pays tax and therefore your personal earnings will be lower (or can be provided you set it up correctly) but will still be taxable.

    A2) these will be affected either way, first way is by the income you give yourself, the second is via the assets test (the company will be an asset which includes all equipment and stock that it retains). Parenting Payment Assets Income assessment family tax fact sheet
    A3) unsure about maybe here

    B) buying a vehicle will affect the asset value of the company, therefore affecting your assets according to centerlink, personal usage of the vehicle is not claimable, and a log would need to kept …. also you incur Fringe Benefit Tax (increases your personal tax rate)…

    AS I SAID YOU REALLY NEED AN ACCOUNTANT TO CONFIRM ALL THESE THINGS PROPERLY…

    #1080476
    BrisbaneKayaks
    Member
    • Total posts: 21

    Thanks for the information Cretsiah, much appreciated.

    I’ll have to seek an accountant in the New Year. So many questions, such little time!

    If anyone can recommend an accountant near Tingalpa, Q. 4173 that would be great. Just private message me the details.

    – Julian

    #1080614
    BrisbaneKayaks
    Member
    • Total posts: 21

    Thanks for the information Cretsiah, much appreciated.

    I’ll have to seek an accountant in the New Year. So many questions, such little time!

    If anyone can recommend an accountant near Tingalpa, Q. 4173 that would be great. Just private message me the details.

    – Julian

    #1080478
    Normanby
    Member
    • Total posts: 194

    Hey Julian,
    When I have new clients with questions like yours, the meeting to go over all the issues involved generally takes about an hour.
    There’s a lot to go over here and I hope your meeting with an accountant clears up much of it.
    I will add though that owning a Company (pty ltd) or trust, while being on FTB, also means filling in an annual form and questionnaire for Centrelink. This wouldn’t be a problem if anybody at Crntrelink (or the FAO) had any business savvy, but alas they don’t, and they seem to think that business owners are all rich, and trying to rort the system.
    Also, once one of your kids is over 7 you’re expected to be working part-time (to get any kind of parenting payment) which can be hard to prove when you’re earnings are from your own company, because they are rarely called “wages”, they’re usually called “drawings”.
    I’d have to look it up, but if memory serves the FTB threshold is around $113k. If you operate through a company the FAO will want to know not only the “wages” reported on your tax return but also your “director’s loan account” balance, so they can make sure that they know about ALL the money you’re receiving, not just the taxable stuff that is reported on your tax return.
    Better still, flourish like crazy, make outrageous profits, and you won’t miss the government money, that comes with so many strings as to be onerous.
    Cheers,
    Matt
    http://www.nohassleaccounting.com.au

    #1080615
    Normanby
    Member
    • Total posts: 194

    Hey Julian,
    When I have new clients with questions like yours, the meeting to go over all the issues involved generally takes about an hour.
    There’s a lot to go over here and I hope your meeting with an accountant clears up much of it.
    I will add though that owning a Company (pty ltd) or trust, while being on FTB, also means filling in an annual form and questionnaire for Centrelink. This wouldn’t be a problem if anybody at Crntrelink (or the FAO) had any business savvy, but alas they don’t, and they seem to think that business owners are all rich, and trying to rort the system.
    Also, once one of your kids is over 7 you’re expected to be working part-time (to get any kind of parenting payment) which can be hard to prove when you’re earnings are from your own company, because they are rarely called “wages”, they’re usually called “drawings”.
    I’d have to look it up, but if memory serves the FTB threshold is around $113k. If you operate through a company the FAO will want to know not only the “wages” reported on your tax return but also your “director’s loan account” balance, so they can make sure that they know about ALL the money you’re receiving, not just the taxable stuff that is reported on your tax return.
    Better still, flourish like crazy, make outrageous profits, and you won’t miss the government money, that comes with so many strings as to be onerous.
    Cheers,
    Matt
    http://www.nohassleaccounting.com.au

    #1080480
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Matt,

    Thanks for all the information. I really appreciate it.

    I know all to well about centrelink. They infuriate me. The sooner I can be aelf-sufficient, the better. The thing is, they are keeping me afloat whilst I study uni and send my kids to a nice school.

    Ill definitely see an accountant in the new year. My concern is making plenty of profits and my ex-wife receiving a good portion of it via the CSA. I don’t have a problem paying CS, just rather it put in some type of account where my ex-wife cant use it to support her other kid she had with someone else, or to use for her own personal things and my kids getting nothing.

    Cheers,
    Julz

    #1080616
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Matt,

    Thanks for all the information. I really appreciate it.

    I know all to well about centrelink. They infuriate me. The sooner I can be aelf-sufficient, the better. The thing is, they are keeping me afloat whilst I study uni and send my kids to a nice school.

    Ill definitely see an accountant in the new year. My concern is making plenty of profits and my ex-wife receiving a good portion of it via the CSA. I don’t have a problem paying CS, just rather it put in some type of account where my ex-wife cant use it to support her other kid she had with someone else, or to use for her own personal things and my kids getting nothing.

    Cheers,
    Julz

    #1080482
    Normanby
    Member
    • Total posts: 194

    I hear ya!
    I’m a single Dad myself (have sole care of the teenager) but up until she was 13 I was an every-second-weekend Dad, and thus paid CS.
    I found CSA very Mother-centric, especially when I had to prove that I had become sole-carer.
    I’m afraid CSA are pretty much onto all the ways we used to be able to use to reduce our personal taxable income: using a company, investment property, income splitting with a new partner through a trust or partnership, CSA are aware (and highly suspicious) of them all.
    And if the Mother doesn’t believe the figures she’s can very easily lodge an objection, which then places you in CSA’s very own kangaroo court.
    All I can suggest for now is to use a company so you can legally write off as many of your personal expenses as possible (like car %, phone, computer & IT, etc…) to keep the personal taxable income as low as legally possible.
    Then keep relations with the Mother as diplomatic as possible to try and ensure she never feels the need to lodge an objection with CSA.
    And like me, you might have to just confront the fact that you have absolutely no say in how she spends the CS you pay her. She’s quite within the law to spend what you pay her on diamonds and feed the kids dog food if she wants to.
    You can console yourself (as I did) with the fact that if you continue simply being the best Father you can be, as the kids grow smarter and more aware they’ll become better able to see your qualities, and gravitate towards you.
    It happened to me like that, and now I have these few precious years of full-time parenting, an experience I cherish.
    Sorry to switch from accountant to counsellor there, but I know the frustrations and empathise, and I hope I’ve helped.
    Cheers,
    Matt
    http://www.nohassleaccounting.com.au

    #1080617
    Normanby
    Member
    • Total posts: 194

    I hear ya!
    I’m a single Dad myself (have sole care of the teenager) but up until she was 13 I was an every-second-weekend Dad, and thus paid CS.
    I found CSA very Mother-centric, especially when I had to prove that I had become sole-carer.
    I’m afraid CSA are pretty much onto all the ways we used to be able to use to reduce our personal taxable income: using a company, investment property, income splitting with a new partner through a trust or partnership, CSA are aware (and highly suspicious) of them all.
    And if the Mother doesn’t believe the figures she’s can very easily lodge an objection, which then places you in CSA’s very own kangaroo court.
    All I can suggest for now is to use a company so you can legally write off as many of your personal expenses as possible (like car %, phone, computer & IT, etc…) to keep the personal taxable income as low as legally possible.
    Then keep relations with the Mother as diplomatic as possible to try and ensure she never feels the need to lodge an objection with CSA.
    And like me, you might have to just confront the fact that you have absolutely no say in how she spends the CS you pay her. She’s quite within the law to spend what you pay her on diamonds and feed the kids dog food if she wants to.
    You can console yourself (as I did) with the fact that if you continue simply being the best Father you can be, as the kids grow smarter and more aware they’ll become better able to see your qualities, and gravitate towards you.
    It happened to me like that, and now I have these few precious years of full-time parenting, an experience I cherish.
    Sorry to switch from accountant to counsellor there, but I know the frustrations and empathise, and I hope I’ve helped.
    Cheers,
    Matt
    http://www.nohassleaccounting.com.au

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