Question #5: I’ve taken out $200,000 from my company. Will that affect my tax?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient
lifestyle business.

The fifth most popular question I get asked in the lead up to 30 June is “I’ve taken out $200,000 from my company. Will that affect my tax?”

Well, the short answer is yes. The more detailed answer is there any money that you take out of your business must be accounted for if you’ve personally taken that money, it will then need to be triggered in one of two ways:

As a personal income to you
As a directors loan which will be repaid back to the company

So where option two is not possible or in fact intended, then it will count as personal
income. Now, this can be derived in one of a few ways. It can be in terms of salary wages. It can be directors fees or it can be a shareholder dividend.

The first two will attract income tax at individual rights i.e. tax of $200,000 at current rates is over $67,000 assuming no other income or deductions. Now if you treat it as a dividend, it will depend on whether you can issue frank dividends or unfranked dividends.

So franked dividends are when your company has already paid tax on those prior
earnings and therefore, you can get a credit in your individual personal income tax for that company tax already paid on the $200,000. So the net tax payable by you personally in this example would be nearly 24,000 on current rates.

So you can see taking out the money if it’s not going to be repaid will affect your tax most definitely. But there are ways in which that can be reduced in terms of the timing and how we account for it

So I’d be found this useful thank you for joining me look forward to speaking with you soon bye for now.

Tony Dimitriadis