Transferring business cash to your home loan
Moving money from your business account to your home loan? Be very careful about how you do it and ensure that the process is documented.
Division 7A
If you run a company, there are a set of tax rules called Division 7A. It's a particularly tricky piece of tax law designed to prevent business owners from taking funds out of their business when the funds haven't been taxed at the individual rate, only the corporate tax rate.
The consequence of paying your home loan with your business money
If you take money from your company bank account to pay down your personal home loan, the ATO might treat it as a deemed dividend and you'll need to declare the amount in your personal tax return. The dividend is not
Ensure your loan agreements are in place
If you decide to take money out of the company account for personal purposes, you can either pay back the amount or put a complying loan agreement in place before the earlier of the due date and actual lodgement of the company's tax return for that year.
Get advice
Before you take money from your company account, it's best to speak to your accountant and make sure your documentation is in place. As always, documentation is the key to stating on the right side of the ATO should they audit the business or challenge your personal tax returns.
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Disclaimer
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
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