Another money question

[Deej]

All only hypothetical of course, but theoretically if you wanted to get money out of a reasonably profitable business without letting the tax man take a big bite out of it, what are some ways you might do it?

I'm thinking one good way is to get paid in cash, and still put through the costs incurred as an expense. Only problem is not many potential customers would want to fork out big money without some form of invoice or receipt. Mainly limited to one off jobs for friends and blow-ins.

Any other ideas?

(of course I'd never do this myself, just an interesting exercise i thought!)

 

[ozzult]

As a business, (not of the lawnmower variety) I think it is pretty difficult to skip the books. It's the claims that you can cash in on, and they are all legal too.

 

[Squeak]

A variation of the old real estate catchcry:

Depreciation
Depreciation
Depreciation!

 

[Rob]

Legally or illegally?

Any idiot can avoid tax illegally, the system of self assessment ensures that it is incredibly easy to understate income and overstate deductions. Of course, you might run into trouble if you're asked about it later on down the track.

 

[Westy_Boy]

Re: Re: Another money question

Originally posted by Deej
I'm thinking one good way is to get paid in cash, and still put through the costs incurred as an expense. Only problem is not many potential customers would want to fork out big money without some form of invoice or receipt.

If your main clients are other businesses, the biggest problem is that they've got nothing to gain from it - unless you make it worth their while by providing significant discounts (which makes it less worth the risk from your perspective), the only way they'll see 'cash deals' are as an expense which they won't be able to claim on their books - they'll be worse off just so your business can avoid paying tax.

As for including all of your costs - if cash deals become pretty common, you're better off excluding some of your expenses. The ATO ain't dumb - they've got average/typical data for businesses across all industries, and a couple of major discrepancies between your (high) costs and (low) disclosed turnover will have them sussing you out in no time.

 

[Former]

I was on a jury in a trial regarding this very thing. The ATO were suss on a little shop as they understated income but left expenses unchanged. Then they took their REAL books to the bank to get a loan.

 

[Rooboy 34]

If your turnover is under $1M, then you can enter a tax system called STS (Simplified Tax System). STS uses cash accounting, so therefore if you prepay a lot of your expediture, you will incur the costs in the current year meaning your profit won't be as high. I guess the downside to this is that it is basically just a deferral system because next year you won't be able to claim the expenses!!!

Other legal ways are to bump up your Superannuation, negative gear an investment on the side, or provide FBT exempt benefits such as mobile phones & laptops to any employees as part of their package...

 

[Pieman7]

Heard a few dodgy stories about avoiding Tax, my friends parents run a business and they set up a bank account for him and payed money into it claiming at as wages when he never set foot in the factory and probably wasn't even in his teens.

TAB Phone accounts are another good way to avoid the crooks at the ATO and bank fees.