Have some extra cash in your company bank account and wanted to withdraw it for personal use? Broadly, there are only 3 ways that you can take money out of a Pty Ltd company:
- Wages: You could organise for the company to make a wages payment to you via the PAYG system. This would involve the company withholding income tax out of the wages (in a similar fashion to any other employee that is employed in your business) and there would be superannuation, and workers compensation costs associated with this payment, too.
- Dividends: The company could make a dividend payment to you. Depending on the company and your personal tax position, additional income tax might be payable by you on this dividend, however some of this income tax would be offset by franking credits. There are generally no superannuation or workers compensation costs associated with dividend payments.
3. Return of money that you originally put into the Pty Ltd (I.e. a repayment of a loan you made to the Pty Ltd). There are no tax issues with this, provided you can prove that the company is just paying you back for the money that you originally invested in it. However once this initial lump sum has been paid back, you would need to look at dividends or wages, or a combination of both.
Remember that the company’s money is not your money! Business owners make this mistake much too often and tend to treat the company bank account like it is their personal account and “live out of the business”. There is nothing wrong with wanting to take money out of the company, you just need to be aware of the tax implications of doing so. To determine the most tax effective way to make the withdrawal from your company, please get in touch with us before making any payments.
DISCLAIMER: This is general information only and is not advice. Liability limited by a scheme approved under professional standards legislation.