paying yourself a wage from your own business

[skippy79]

just loooking into buying a business in Oz..

 

ATM in belgium we have a company and pay ourselves say €1500 take home each monthly, the business pay's tax and social security costs on top of that ( the business would pay something like €2500 for us to have €1500 take home )... Our company has a net profit of €25000, but this is after our wages, so we either pay out dividends or just leave the money in the company and reinvest of watch our business bank account grow...

 

now when looking at buying a business in australia I see plenty of businesses advertised with a net profit (just using any figures ) of $120.000, but can be higher with operating boss... this is what I read out of it....

owner who has enough employees employed so he does minimal work, if he would have less staff hours to pay and would work more there would be less staff costs, so more net profit...

 

From the $120.000, how much after tax would he pocket? or doesn't he pay tax on his income?

 

kind of confused here, so hopefully someone can come along and help me :unsure:

 

I obviously would be talking to an accounant beofre buying a business

 

Big thanks already!!!

[Victoriagal]

If you make a profit at the end of the year you will pay income tax on it.

 

My take on the comment is that if you are working in the business you will make more money - could be two reasons for that... Harder for staff to rip you off if you are there all day and if it is your business you will ensure it is run effectively, efficiently and profitably?...

 

Sole traders and partners do not have to pay themselves 9% superannuation if they do not wish to but staff must be paid this in addition to wages and holiday pay.

 

​What type of business are you looking at?

[Alan Collett]

On $120k of pre tax profit a Pty Limited company would proably be paying tax at 30%, leaving $84k after tax available to distribute as a dividend.

 

The shareholder/s would receive $84k on which there is a franking credit of $36k - ie $120k gross income. The $36k is available to reduce the personal income tax bill of the shareholder/s - or can be repaid in part if the shareholder's marginal rate of income tax is less than 30%.

 

Note though that the company must have paid the income tax for the franking credit to be available - in the first year of ownership the company might not have actually paid tax on its profits to generate a franking account.

 

Best regards.

[skippy79]

On $120k of pre tax profit a Pty Limited company would proably be paying tax at 30%, leaving $84k after tax available to distribute as a dividend.

 

The shareholder/s would receive $84k on which there is a franking credit of $36k - ie $120k gross income. The $36k is available to reduce the personal income tax bill of the shareholder/s - or can be repaid in part if the shareholder's marginal rate of income tax is less than 30%.

 

Note though that the company must have paid the income tax for the franking credit to be available - in the first year of ownership the company might not have actually paid tax on its profits to generate a franking account.

 

Best regards.

 

ok thanks,

sorry if being a bit dull, net profit is after tax isn't it?

 

so asuming $120.000 is after tax, would be we able to pay ourselves out say $100.000, say $50.000 each, through a calculator on the web I have calculated that we would take home $3468 each, correct??

 

​thanks

[skippy79]

On $120k of pre tax profit a Pty Limited company would proably be paying tax at 30%, leaving $84k after tax available to distribute as a dividend.

 

The shareholder/s would receive $84k on which there is a franking credit of $36k - ie $120k gross income. The $36k is available to reduce the personal income tax bill of the shareholder/s - or can be repaid in part if the shareholder's marginal rate of income tax is less than 30%.

 

Note though that the company must have paid the income tax for the franking credit to be available - in the first year of ownership the company might not have actually paid tax on its profits to generate a franking account.

 

Best regards.

 

ok thanks,

sorry if being a bit dull, net profit is after tax isn't it?

 

so asuming $120.000 is after tax, would be we able to pay ourselves out say $100.000, say $50.000 each, through a calculator on the web I have calculated that we would take home $3468 each, correct??

 

thanks

[Alan Collett]

Net profit can be before or after tax.

 

If I was a vendor of a business I'd be quoting pre tax.

 

Suggest you ask for the full financials and drill down into the numbers more deeply.

 

Best regards.

[skippy79]

thanks