Changing the Structure of an Australian Business

It’s not uncommon for business owners to consider modifying the structure of their enterprise; from turning a sole trading service into a limited company, through to merging as a partnership.

In these cases, there are correct and incorrect ways to do things – and some of the most common issues that occur include:

• Incorrectly reporting earnings and income as the wrong business
• Using personal bank accounts outside of being self-employed or in a partnership
• Claiming business expenses from another entity that did (or still does) exist

One of the most important things to consider is that the right knowledge can make a difference to whether the correct procedures are followed. Always be aware that:

• The company in question will always be considered as an entirely separate entity to the director of that company, as well as any shareholders
• Any money that the company brings in belongs to the company and must be placed in a dedicated account first and foremost
• All assets belong to the company and cannot be claimed personally by any member
• Division 7a could apply if assets are not properly managed, for example; if a company asset is being used by a director, it must be clearly defined as being of benefit to that director (when being used for personal purposes)

There is also such thing as a trust structure and in these cases, the following responsibilities should be understood:

• The holding and possession of property assigned to the trust to ensure that all beneficiaries benefit accordingly
• Handling of the tax affairs on behalf of the trust
• Paying any and all of the trust’s tax responsibilities and liabilities

For anyone considering restructuring their business, it may be worthwhile to pay attention to the option to ‘rollover’ to make the re-structure simpler. Speak to our accountants to get a clearer picture on your responsibilities.