The Top six questions that I receive from business owners in the lead up to 30 June Tax Year End – Question #5

Top Tax Question #5 – I have taken out $200,000 from my company account. Will that affect my tax?

Short answer: Yes

Detailed answer: Any money you take out of your business must be accounted for. If you have personally taken money, then it will need to be treated one of two way: (1) as personal income to you, or (2) as a Director’s Loan which will be repaid by you back to the company. Where option two is not viable or indeed not intended, then it will count as personal income to you. This can be in the form of Salary/Wages, Directors Fees or Shareholder Dividends. The first two will attract income tax at individual rates, i.e. Tax on $200,000 at current rates is $67,632 (assuming no other income or deductions).

If you treat it as a Dividend, it will depend on whether you can issue Franked Dividends or Unfranked Dividends. Franked Dividends are when your company has already paid tax on prior earnings and therefore you can get a credit for that tax which has been paid relevant to the $200,000. The net tax payable by your personally in this example would be $23,917 on current rates.

If you would like further clarification or have any other questions, please do not hesitate to ask us.

Did you know that I’m releasing my book on Business Financial Management to help businesses cross the chasm of Tax rules and laws to grow their lifestyle business? Take a look at www.buildit-book.com.au to find out when it comes out!

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Tony Dimitriadis