Some of the common errors The Australian Taxation Office (ATO) see include:
- reporting income for the wrong entity;
- claiming expenses incurred by another entity as business expenses; and
- personal use of business bank accounts.
For small business clients who have incorporated:
- the company is a separate legal entity from you as a shareholder or director;
- money that the company earns, belongs to the company;
- the company owns its assets, and they cannot treat them as their own; and
- if a director or shareholder of a company uses company assets for their personal use, it must be properly treated as a benefit to the director or shareholder. The Division 7A or fringe benefits tax (FBT) provisions could apply if not treated correctly. Please refer to the Using your company’s money or assets guide for further information.
If you move to a trust structure, the trustee's responsibilities, include:
- holding the trust property (including assets, investments, and income) for the benefit of the beneficiaries;
- managing the trust's tax affairs; and
- paying some tax liabilities.