How Can I Take Money Out of My Business?

Your business is performing well and there’s money in the bank. But how do you go about accessing it without causing yourself a tax headache and a tangle of issues to tidy up later?

The actual act of taking money out of your business is simple, but let’s walk through 3 ways to do it that could keep you from ending up in a mess at tax time.

You Could Take the Cash Out of Your Company as a Wage.

Taking cash out of your business could be the best choice if the person taking the payment is working inside of the business as an employee.

From a business perspective, if you take this route, you’ll need to think about PAYG withholding, superannuation, workers compensation insurance, payroll tax. Also you need to consider how profitable your business is, wages are included as a business expense which will reduce or eliminate profits - consider how this may impact your borrowing power or how much your business is worth to a buyer.

From a personal perspective, a wage forms part of your taxable income. You will have to pay tax on this (albeit covered in full or partially by the tax withholding).

Take the Money Out of Your Company as a Dividend.

Taking money out of your company as a dividend could be a valid choice if the person taking the cash is a shareholder - any dividend payments would go directly to the shareholders.

From a business perspective, if you take the cash out of your company you’ll need to consider if this is franked (tax credits) and if you have enough retained profits. Dividends are not an expense, so will not impact your profitability.

From a personal perspective, a dividend forms part of your taxable income. You will have to pay tax on this (albeit covered in full or partially by the franking credit).

You Could Take Cash Out of Your Company as a Loan.

Alternatively, the cash could be taken from the company as a loan. From a business perspective, this is not an expense (so profits stay high) and from a personal perspective, this is not taxable income (so no tax on this one).

Taking cash out as a loan is could be a good choice, and an easy one, but like any loan it comes with strings. If this truly is a loan, the ATO expect that standard commercial terms apply - think minimum repayments, interest charges and also a minimum term of the loan (often these are referred to as Division 7A loans). Again, as with any loan, it can get complicated and there is a decent amount of paperwork that needs to be drawn up for it all to be above board.

This isn’t a DIY option - make sure you have an accountant who understands the requirements to help you with this.

Take Money Out of Your Business Confidently.

We are strong believers in taking the whole picture into account when considering which avenue is best for taking money out of your business. Knowing your options and making an informed decision is a great way to feel confident in your choice.

Every situation is different and not all of the ways to take money out of your business will suit every business.

Already Taken the Money Out of Your Company?

If you’ve already taken the cash out of your company without thinking through the tax implications you have until June 30 to tidy up any loose ends. It’s not too late to take advantage of strategic planning until the end of the financial year.

We Are The Business Accounting Experts.

If you’re unsure of the best way to take money out of your company, that’s not unusual, but we are all over the details.

One of the biggest reasons we operate our business on a flat fee arrangement is that it allows us to help you make decisions for your business as they arise. You can rest easy knowing you can contact us with your questions instead of flying blind and hoping for the best.

An expert can transform your approach to finances and empower you to take control of your business’s financial health. Don’t let financial uncertainty hold you back from living out the dream you set out to when you started your business.

We’re passionate about empowering business owners to make confident & informed money decisions.

Ditch the chaos & start navigating your numbers with us now.