Question about Tax

Hi all,

I hope this isn't going to be against forum rules but I don't know where to ask for help/general advice without being told to find an accountant and pay for it.

I'm in uni and started investing in the sharemarket with some friends. We pooled together some money and started up a company with an ABN/TFN so that we could do it properly/legally . All we've done is buy a couple of stocks. (haven't sold any yet)

Problem is I'm not sure how taxation works. The ATO website is heaps confusing and doesn't provide an e-Tax program for businesses nor could I find a tax form booklet with all the necessary forms for businesses. Is it possible to do business tax ourselves? I really don't want to pay an accountant since we're all still in uni and don't earn much (hence we pooled our money together).

Thanks in advance.

Best go to the library and get the tax law volumes down , best get your friends too , there's over 30,000 tax laws .

Or pay an accountant and claim it .

If you spend an hour a month doing tax , you've blown 40 minutes research or trading time , even worse , leisure time ........

If your in Uni , put up a memo on the notice board , your bound to strike a would be accountant in a Uni campus .

Try the Unis website ????

The only free rides are long ones ...........

A simple company tax return, as yours sound like it will be, should not cost you any more than a personal tax return. Get a quote I think you will be surprised. Tell them how little you need. I mean you really have nothing to work out. Less than a personal tax return.

I think you may find that accounting for shares is not always that easy, especially once you start getting dividends with withholding tax, foreign tax credits, stapled securities, capital distribution components, etc. Sometimes they'll give you a form showing exactly where each component goes on your tax return, but I think that would generally assume a personal tax return rather than a company one.

I'm not sure exactly how much is required with a company, but as well as a tax return my accountant always does a balance sheet and P&L statement. If it's not a trading business (in which case it probably shouldn't be in a company structure in the first place), then there's also the capital gains part of the tax return to do (although I assume that would be the same with personal returns as well). And there are other issues like the annual company statement (for ASIC), keeping track of the franking account, and being careful what you do with company funds to avoid Div7a issues (Div7a relates to loans to directors and their associates).

If you are operating it as a trading business, then check up on GST rules. While you're only doing a little I don't think it really matters, but if you do build up to a significant turnover (the figure of $50K rings a bell) then I think you'll need to register for GST and do regular BAS/PAYG statements. That also lets you claim back the GST on brokerage though. If you get to that stage you can register at the ATO business portal and do the statements online.

This is all just my understanding though, and I'm not sure exactly how much is required and what's just nice but optional.

GP

I assume that you are holding the shares for the purpose of capital growth (i.e. capital gains), I am not sure that holding your shares in a company is a good idea, no CGT discount, Div7A issues, annual fee to the ASIC $212.00 etc.

I would have preferred to hold the shares through a trust, where any capital gains would flow through to the beneficiaries and assuming that they are individuals and satisfied the relevant CGT rules would be eligible for the CGT discount.

I personally try to avoid companies when small sums of money are involved for simple reason of not paying the ASIC their annual charge of $212.00.

Just my 5 minutes worth; What state are you based in?

GregT said:

I assume that you are holding the shares for the purpose of capital growth (i.e. capital gains), I am not sure that holding your shares in a company is a good idea, no CGT discount, Div7A issues, annual fee to the ASIC $212.00 etc.

I would have preferred to hold the shares through a trust, where any capital gains would flow through to the beneficiaries and assuming that they are individuals and satisfied the relevant CGT rules would be eligible for the CGT discount.

I personally try to avoid companies when small sums of money are involved for simple reason of not paying the ASIC their annual charge of $212.00.

Just my 5 minutes worth; What state are you based in?

Click to expand...

Good point Greg, holding your shares in a Company is really only worth it if you are a trader, not an investor. I find partnerships work the best for share syndicates, regardless of how many investors you have - then each investor can decide what works the best for them and the tax return is relatively straight forward.

Individual wise, a family trust with the potential of a corporate beneficiary is the best of both worlds..... if you want to retain your earnings, distribute to the Company, do you have capital gains, distribute to the Company...

Cheers

Wow, I'm overwhelmed by the replies and help! Thank very much guys.

We're based in NSW. Yeah, we're pretty much investing for capital gains only. But having a trust never came up.

reece55 said:

Good point Greg, holding your shares in a Company is really only worth it if you are a trader, not an investor. I find partnerships work the best for share syndicates, regardless of how many investors you have - then each investor can decide what works the best for them and the tax return is relatively straight forward.

Individual wise, a family trust with the potential of a corporate beneficiary is the best of both worlds..... if you want to retain your earnings, distribute to the Company, do you have capital gains, distribute to the Company...

Cheers

Click to expand...

probably the most important facet - what type of entity is going to hold the shares. its not too late to change your mind, depending on the cost of moving & creating a new entity, plus any capital gains issues of course.
this is where getting some good initial advice may be beneficial - whether your aims are to create gains, or dividend income, or keep costs low, or simplify reporting requirements.
good luck, and keep us all up to date if you wish.