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Any disadvantages to becoming employed within your own company?

Discussion in 'Business Accounting & Tax' started by Dawnus, 11th Sep, 2017.

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  1. Dawnus

    Dawnus New Member

    Joined:
    22nd Aug, 2017
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    2
    Location:
    Perth
    Hi everyone

    I'm considering putting myself on the payroll just to have a steady income to manage personal life and pay myself some super any disadvantages of doing this from a taxation point of view?
     
  2. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    24th Aug, 2016
    Posts:
    158
    Location:
    Sydney
    How are you paying yourself at the moment? Just from profits? Directors fees?

    It's quite reasonable and common to have yourself as an employee.

    I'm not an accountant or tax advisor, so can't list all the pros and cons - but I pay myself a regular salary each month out of the business.

    It can help with showing consistent income for finance purposes - and also shows that the business is strong and healthy if it is paying the salaries of the owners as well.

    Some businesses show great profitability on paper - but when you look closely at the books, you note that the owners never took a salary and only paid themselves out of profit - so the headline profit figures don't tell the entire story!

    The main downside of paying yourself a salary will be that you have to pay yourself superannuation as well - but that can also be a good thing, depending on what your view of super is.

    Depending on how much you intend to pay yourself, it can be more tax effective to retain the capital within the business for future growth/expansion - once you get over $37,000 you're paying 32.5c in tax for every $1 earned (up to $87,000), compared to the company tax rate which is something like 28.5% now?

    But at the end of the day - once you earn enough you'll be paying tax no matter how you get paid so it's all swings and roundabouts!
     
  3. Dawnus

    Dawnus New Member

    Joined:
    22nd Aug, 2017
    Posts:
    2
    Location:
    Perth
    Hi Simon

    Thanks for your reply to the message

    Yes just paying out of profits really, taking 30% out for tax and 10% for gst putting in another account.
    Might consider paying myself as an employee up to 37k then retain the rest in the business and distributing some more at the end of the year.
    Not sure I'm the biggest fan of the super set up I prefer to do my own thing with real estate but no harm in having a little going into it I guess.