The low down on director's loans
EPISODE 98
Notes
Today, I'm talking all about director's loans - a topic that has many business owners in a bit of confusion. This episode is geared towards business owners operating a company business structure, however if you’re a sole trader or in a general partnership, it’s important to stay on top of the ins and outs of business so that you can continue to make informed decisions.
When a working director receives a salary from their company, the process is similar to that of any other employee. The salary is processed through payroll, ensuring that taxes are withheld and super is calculated accordingly. This legitimate method of withdrawing money from a company offers a range of advantages. However, I see so many directors of companies lacking clarity around the correct ways to receive or use company funds, and therefore put themselves at risk. We’ll explore the best practices for receiving a loan from your company and the considerations you need to be aware of to ensure compliance with financial regulations.
Now, there’s more to director’s loans than a director taking money out of the company. Conversely, a director may contribute funds to their business bank account from their personal one - another type of director’s loan. For example, when I first started my business, there wasn’t enough cashflow in the business bank account to buy a car for travelling to see clients. So, I transferred my personal funds to the business to make the purchase, creating a loan to the company that was in my favour.
In this episode, I dive deeper into tackling repayments of loans before tax time, give you an overview of what franking credit is and why it is the most effective way to distribute profit to shareholders. But don’t worry - I keep it short and sweet so you can digest all the information easily!
Director's loans are significant, especially in the eyes of the ATO. Remember, the company’s money is not personally yours, and treating it as such has the potential to land you in some hot water come tax time. So, join me today and stay educated on how to keep doing good business.
LINKS:
Register your interest in the Bookkeeping it Real Mentoring Program here.
About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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