What tax breaks do businesses get?

[Crazy Dazz]

I'm a CPA, with a B.Com, MBA, & JD, and over twenty years’ experience as a Tax Specialist in both Public Practice and Corporate.

Getting into business because some whacker tells you there are tax breaks, is the single worst reason imaginable.
30~40 years ago, before FBT and all the other “tax reforms”? Perhaps, but even then it was more a question of what you could get away with, rather than what was technically correct.

As I mentioned, as a PAYG employee you really don’t have much “choice” when it comes to tax compliance, but running a business does open up all sorts of avenues for tax fraud. Yes, ANYBODY can register for GST and start claiming refunds on your ITC, but why stop there. You don’t even actually have to spend the money, just make the numbers up and the government will send you the money. Of course this possibility HAS occurred to the government, they do conduct audits, and if found guilty of such blatant fraud you will go to prison. (In fact penalties for defrauding the government are generally the most severe.)

Citing Input Tax Credits as reason to go into business is beyond moronic.
How’s this for a proposition: Instead of spending $110 so you can claim $10 back, send ME the $110 and I’ll give you $50 back! Good Deal?

Yes, the rules on WHAT you can claim are slightly more relaxed when it comes to businesses, but mostly the advantage has to do with LOSING money. Also you can claim peripheral expenses that you wouldn’t have a use for without the business. So if running a business you can claim deductions for office rental, a photocopier & coffee machine, and a secretary. Things you wouldn’t need if you didn’t have the business.

“Companies and Family Trusts” are NOT businesses, they are legal entities. There are SOME advantages to using these, both for businesses and as investment vehicles, but again the rules have been drastically tightened. Such that many people not using them correctly can actually wind up WORSE off. Put simply, if you want to “park” income, use a company as the tax rate is lower but by and large you need to pay tax on the money when you take it out of the company. Family trusts can be used to split income, so if you have a spouse, adult children, parents, etc, with little or no income (and no social security issues) you can often use a discretionary trust to split the income, but there are complicated anti-avoidance provisions now that make this difficult to manage. There are also provisions for small business based on the personal exertion of the proprietor that prevent you putting the income through another entity.

As I said, if you have the wherewithal to make a SUCCESS of a business venture, then go for it. Its one viable way to get ahead of the curve, something you will struggle to do as a PAYG worker.
but “starting a business for tax breaks” (which was the OP’s question) is just nuts.
Furthermore, if you’re going to end up running a small 1-2 person business performing the same work that you would otherwise be doing as an employee, forget it. Over the years, I have seen SO MANY people who have risked everything, invested their life savings, to basically buy themselves a low-paying job.

For some people, running a business is a “lifestyle choice.” Some businesses will give you the flexibility to “work your own hours” or alternatively to work 70 hours a week (which you generally cannot do in a wages role.)

[zilo]

The original poster asked what tax breaks businesses get, not whether to just start a business simply because of the tax breaks.

Above poster needs to read a bit more carefully before calling others idiots.

It's amazing that some who have never started a business will call it too risky when all they have ever done is work for a boss all their lives.

[GT0132]

Originally Posted by zilo

Basically for starters you get a 10 percent discount on everything you buy...the GST.

It really is on everything invoiced in your business name, regardless of whether it generates income or not.

Yes, but only to the extent the items purchased are used in your business and are not personal or domestic in nature. i.e you can't buy your weekly household groceries through your business and claim back the GST charged.

Originally Posted by zilo

Also...forget talking to accountants about making a profit, they only record history, not predict it.

Pretty bold statement that one. Recording history is one of their tasks but an equally if not more important task of the financial controller in any reasonably sized business, especially a publicly listed one, is to forecast profit outcomes, sometimes for periods up to 5 to 10 years.

[zilo]

Originally Posted by GT0132

Yes, but only to the extent the items purchased are used in your business and are not personal or domestic in nature. i.e you can't buy your weekly household groceries through your business and claim back the GST charged. .

partially agree with you.

I can buy a trolley full of groceries as long as the tax invoice is in the business name I can do whatever I want with them.

If I choose to immediately throw the lot in the bin then that is my poor business decision.

Equally if I choose to put on lunch with all my staff I can do that as well.

Originally Posted by GT0132

Pretty bold statement that one. Recording history is one of their tasks but an equally if not more important task of the financial controller in any reasonably sized business, especially a publicly listed one, is to forecast profit outcomes, sometimes for periods up to 5 to 10 years.

It might surprise you, but that statement came from someone who has over 40 years experience as an auditor and tax accountant.

.....my accountant!

[GT0132]

Originally Posted by zilo

partially agree with you.

I can buy a trolley full of groceries as long as the tax invoice is in the business name I can do whatever I want with them.

If I choose to immediately throw the lot in the bin then that is my poor business decision.

Equally if I choose to put on lunch with all my staff I can do that as well.




It might surprise you, but that statement came from someone who has over 40 years experience as an auditor and tax accountant.

.....my accountant!

Doesn't surprise me actually given that many public accountants from that era don't get involved in business planning and forecasting because many tend to specialise in preparting financial statements, auditing them and doing tax returns. The accounting profession has changed markedly in the last 15-20years.

[Auslandau]

Originally Posted by Crazy Dazz

Idiots like some of these posters are a total menace.
Handing out their homespun tax advice at Pubs, BBQs, and now forums. If I’d charged my clients $100 everytime someone said “but my mate told me…” I’d be a multi-millionaire.

I'm a CPA, with a B.Com, MBA, & JD, and over twenty years’ experience as a Tax Specialist in both Public Practice and Corporate.

BUT ..... thats what forums are all about. Not everyone is a professional with their answers to questions posed but are still allowed to post their opinion and experiences.

Instead of calling others idiots, how about using your knowledge & occupation to help like you did in the rest of your post rather than belittling others? They might not be accurate ..... but then thats forums.

If we had mechanics telling everyone who plays with their cars on weekends idiots, the forums would be a very very lonely place. Instead, the many mechanics or those in the know help those who need help or advice and do so 99.9% of the time without belittling others but instead with a smile ........

[private9]

Originally Posted by ILLaViTaR

All of them.

Wow, time to fire my accountant then!

Originally Posted by GT0132

Doesn't surprise me actually given that many public accountants from that era don't get involved in business planning and forecasting because many tend to specialise in preparting financial statements, auditing them and doing tax returns. The accounting profession has changed markedly in the last 15-20years.

Have to agree with this, a good accountant is so much more than just reporting etc.

Originally Posted by zilo

partially agree with you.

I can buy a trolley full of groceries as long as the tax invoice is in the business name I can do whatever I want with them.

If I choose to immediately throw the lot in the bin then that is my poor business decision.

Equally if I choose to put on lunch with all my staff I can do that as well.




It might surprise you, but that statement came from someone who has over 40 years experience as an auditor and tax accountant.

.....my accountant!

zilo, aren't you simply endorsing tax fraud? The type of behaviour that you are describing will eventually get caught out!

[Franco Cozzo]

Originally Posted by private9

zilo, aren't you simply endorsing tax fraud? The type of behaviour that you are describing will eventually get caught out!

You can claim everything until you get audited LOL.

[zilo]

Originally Posted by private9

zilo, aren't you simply endorsing tax fraud? The type of behaviour that you are describing will eventually get caught out!

No mate, am simply showing the absurdity of the GST system.

If it has an ABN and a tax invoice then a business can claim GST on anything it buys.

Whereas...an employee has to justify an expense to get a refund.

Just showing the extremes of the possibilities, and completely lawful.

[zilo]

Originally Posted by Big Damo

You can claim everything until you get audited LOL.

Being an individual is a completely different ball game to being a company.

Hell a company can even sponsor a V8 supercar team ...

An endless bucket of lost money, and the corporate track side tent to go with it.

An audit wouldn't do much if all the paperwork is present and accounted for.

[xtremerus]

Zilo
Can you give us an update, AFTER you have a tax audit on your business.

[zilo]

Originally Posted by xtremerus

Zilo
Can you give us an update, AFTER you have a tax audit on your business.

too many trolls and ghost armies appearing in this thread,

so I'm done with this topic..

[nuthin' fancy]

Originally Posted by zilo

too many trolls and ghost armies appearing in this thread,

so I'm done with this topic..

No, just people who are testing your thoughts.