IDEAL:
Family Business and Tax
Planning for PAYG incomes below $100,000 per annum is best done by a
Partnership of the Spouses - since they are already in a legal Partnership
called Marriage.
ATO / TFN /ABN (Tax File
Number - Australian Business Number etc) Application Forms are obtained free
of charge from any friendly Australian Tax Office. So are the "P"
Returns, the ATO book "Form P Instructions" and ATO s221D PAYE
Variation Application Form.
BEST
CASE SCENARIO:
Women are by nature, creative. They have two natural
traits necessary for the survival of our species - and a SOHO business -
unrelenting determination and a charming assertiveness. They have acquired
the necessary, indispensable management and family administrative skills in
a modern, technological society.
SURVIVING
the TRANSITION:
As a Family, the Spouses and kids can survive the transition
from Employee status to that of Employer much better if the male provider
stays gainfully employed. The Family can then use his Income Tax as part of
the Capital to weather the initial start up costs with the use of the above
ATO s221D PAYE Variation.
SOHO:
(Small Office - Home Office)
If the business is worked from home (SOHO) the mother can take
care of (and employ) the children as needed - and will save on shop
front rental and travel. The employee spouse might then have the travel to
and from the place of employment as a tax deduction.
TIMING:
The ATO s221D PAYE Variation to Capitalise your business requires a
minimum period prior to June 30th to enable the ATO to access the predicted
business losses and so order the Spouse's employer. However, if the family
is a beneficiary of a deceased estate or selling a post '85 investment
asset, now is the time to start a business (see "Minimising
Capital Gains Tax")
FAMILY
CONFERENCE:
At this point the family should have a meeting to arrange
(a)* the Partnership Agreement -
particularly the salary (drawings) of the business working partner(s).
(b) *the contract wages of the kids
(c)* their work Specifications
(d) *the Bank Account arrangements
(e) *any other "need to know"
details
(f) *product analysis and the modus
operandi
(g)* input into the written Business Plan
(h) *the filing of the Bank A/C PETs
(Periodic Electronic Transfers) for "Vampire"
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MODERN
BOOKKEEPING:
The problem with starting a new business is the keeping of
the required book work for the ATO. Fortunately, computers do most of this
work more efficiently - not only your computer, but also the Bank's.
$50,000/annum
None Taxable Income:
The Average Australian Business Family has five members
with a none taxable income of almost $50,000. This must be verifiable and
paper work available in case of an ATO Audit. Each family member and the
Partnership has a Bank Account and with the aid of the above PETs the
Bank's computer is simply told to do the work on the six accounts as
required.
The Bank Statements are
encoded so that the ATO (and the bookkeeper) knows where the "money
goes" - and why.
PET
VAMPIRE:
Once "PET"s have been put in
place in the Bank's Computer they operate automatically, moving
"money" about at the speed of light (electronically) much the
same as an ATM (the same computer)
EXAMPLE:
Poor Dad: Rich Dad:
A PAYE Spouse normally gives the housekeeper $300 cash per
week to manage the household food and stuff.
The Business family man
instead, transfers $300, by PET, to the Partnership A/C. A PET transfers
$300 out and into the working Partners A/C which now users a PET to
transfer $300 out and into etc etc.
PARTNERSHIP
EQUITY:
The first transfer is known as Dad's Equity in the
Partnership - the second PET is tax deductable "Salary" to Mum
etc until everyone is paid each week - and Mum's Equity is equal to Dad's.
Decoded it will
record (a) Equity (b) Tax Deductable Wages (c) Taxable Income (d) None
Taxable Income (the $50,000)
AND
FINALLY:
- Mum puts the food on the table.
LEGAL
BANK ROBBERY!
Over the year, through all accounts at least once and
some twice the book keeper and the ATO will need to know the movement and
decoding of $300,000/annum rather than $15,000/annum ($300 X 52 )
Some Banks believe this to be immoral for they make little profit out of
the "Vampire" Program.
ONLY
20% of the BOOKWORK LEFT:
The remaining 20% of bookwork is reduced to just
order books, invoice/statements/receipts/bank deposit slips, Family
Business Travel Expenses and Sponsorships.
RELIEF:
This relieves the family of a considerable amount of
bookwork and stress - allowing the members to concentrate on the more
important issue - Operating and Maintaining their small Family
Business and Playing Croquet.
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