Hi bellenuit. Thanks for such detailed reply! Much appreciated
I got a few questions though. At the end of a fiscal year, do you just send whatever records you have to your accountant and he/she will do the rest? Is there anything else that you have to send or do prior to tax time?
If you want to keep your accountancy fees low, then you should do all the hack work yourself. For instance, after the first year when I saw how my accountant categorised things for doing the accounts and tax return, I changed my spreadsheets to do things like he wanted. So rather than sending in all the transactions that represented share sales, share purchases etc. (I was classified as a trader), I just sent him the totals for each category. Why pay him to add up figures when you can do it yourself. Similarly for expenses etc., I provided him with totals for "communication expenses", "printing & stationery" etc., which were categories he used in the accounts of the company. Sending in a shoebox full of receipts is not a good idea IMO and if you take the time to learn as much as you can about how the accounts are structured and the tax return done, it can help you to do things in a more tax effective way, maximising your returns. Ultimately it is you (the company) who is responsible for your tax return, not the accountant, so be sure you have appropriate records for everything on file (you don't need to send them to the accountant, just the summary data that he can work with).
There are just a few items you have to attend to before the tax year ends (ASIC fees, PAYG etc.). If the accountant is your agent he will receive the requests from the relevant authority and mail them to you.
Also, what are the procedures/formalities for paying yourself a franked dividend? Do you just transfer the amount from your brokerage account to your personal bank account and then tell your account so he/she will do the rest (the paperwork)?
I just moved an amount from my company bank account or company brokerage account to my own bank account towards the end of the tax year. At that stage I had a good idea of what my personal tax situation was and paid a dividend and franking credit that would be optimal from a personal tax point of view. If you don't understand how the Franking Account works, it is better to tell the accountant your personal situation and what he thinks would be an appropriate dividend. It is a tricky area and if you pay franking credits that you are not entitled to pay, you could end up with some tax issues.
And what if you want to send in more capital to your company bank account which will be subsequently added to the brokerage account? I am guessing you will record every single action that you did and at the end of fiscal year your accountant will reconcile your written record with that of bank/brokerage statements?
Lending TO the company is not a problem. It is just recorded in the accounts as a "Loan From Shareholder" (depending on the system your accountant uses, it may have a different name). Be
very very careful withdrawing money from the company to your own account. If it is money owed to you (part of "Loan From Shareholder"), then you should be OK, but never withdraw more than the company owes you or the dividend you can pay to yourself. If it is deemed to be a loan from the company TO you, then you will have opened a bag of worms that has huge tax consequences. Be sure to check with your accountant if you are withdrawing any amount that could be close to what the company owes you.
I am a bit confused about the carried forward loss issue because when you explained it, you mixed both personal account and company account. Let say my company has a capital loss last year (-10k), and a capital gain this year (+20k). So this year my assessable capital gain is +10k?
Correct, the COMPANY's assessable capital gain is +10K. I was trying to highlight the fact that the company is an entirely separate entity from you personally from both a legal and tax point of view and you cannot intermix your tax issues. What I was trying to emphasise was that if you
PERSONALLY have a large carried forward capital loss (say someone who fared very badly in the GFC), you might be a lot better off to do all your investing in your own name rather than through a company. If you have say $100K carry forward capital loss in your own name, then you will not pay any tax on subsequent capital gains (in your own name) until that $100K is written down. So basically the next $100K you make in personal capital gains will be tax free. But if you were instead to stop investing in your own name (you still have the $100K personal capital loss going forward), but set up a company for investments, then any capital gains made by the company will be taxed at the 30% company rate. Although the company can write off its capital gains against its own carry forward capital losses (as per you example), it cannot write them off against your own personal capital losses.