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656 posts

Ultimate Geek


  #2343479 25-Oct-2019 12:21
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sen8or:

 

BlinkyBill:

 

Batman:

 

just wondering - are you an accountant by any chance?

 



 

no, but I am a Company Director (of my own company) and I employ an accountant, and a lawyer (not a specialist tax lawyer).

 

 

 

 

I am, and whilst blinkybills answers are somewhat simplified, they are not wrong.

 

 

i interpreted the OP’s situation as being pretty simple, indicating a Sole Trader mechanism would work best for that situation. If there is more complexity than I infer, then I am not qualified to advise - that would be best done by a professional.

 

I find it a disservice for people to make inaccurate statements that could be detrimental to someone, and paint them into unwarranted cost and stress.





BlinkyBill


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  #2343673 26-Oct-2019 01:54
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PolicyGuy: And another bank account for your Tax provisions, into which you transfer enough money to pay your GST and enough to pay your Income Tax and ACC levies. ...

 

It's actually amazing how quickly this balance can grow. 🤑 For simplicity sake, I dump 15% for GST & 33% for my personal income tax in there. It's heartbreaking to see 48% of my income disappear into this hole. 😟





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  #2343674 26-Oct-2019 05:55
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ANglEAUT:

 

It's actually amazing how quickly this balance can grow. 🤑 For simplicity sake, I dump 15% for GST & 33% for my personal income tax in there. It's heartbreaking to see 48% of my income disappear into this hole. 😟

 

 

Sorry, but the GST is not your income. If anything, you get to earn some interest from holding the states money.

 

 


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  #2343737 26-Oct-2019 09:53
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jarledb:

 

ANglEAUT:

 

It's actually amazing how quickly this balance can grow. 🤑 For simplicity sake, I dump 15% for GST & 33% for my personal income tax in there. It's heartbreaking to see 48% of my income disappear into this hole. 😟

 

 

Sorry, but the GST is not your income. If anything, you get to earn some interest from holding the states money.

 

 

 

 

 

 

Don't tell the government, they'll whack use of money interest on unpaid gst if they could. 

 

 




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Wannabe Geek


  #2343751 26-Oct-2019 10:14
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So I’m seeing that the myths are still alive and well out there!
Just reiterating that I’m starting life as a contractor and not sure if it’ll last.
So The comment about shutting down a company and having to do P&L and Balance Sheets etc just ti please the IRD seems like a damn lot of work that could end up being in vein.
I guess I can always become a company if I start generating IP that could be either sold or attract investors or other shareholders? Definitely not looking for employees (maybe sub contractors) and won’t be holding any inventory or stock so hardly need Xero or MYOB.
I can see the advantages of having a seperate account for tax and gst from every time I get paid but doubt the interest would be enough to make it worth it!
As mentioned my life is pretty simple and the more complexity I create means more work for me or more money to an accountant!

656 posts

Ultimate Geek


  #2343757 26-Oct-2019 11:12
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Capitalising and then depreciation Intellectual Property is a specialist area and needs specialist advice. 





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  #2343765 26-Oct-2019 12:18
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negan: So I’m seeing that the myths are still alive and well out there!
Just reiterating that I’m starting life as a contractor and not sure if it’ll last.
So The comment about shutting down a company and having to do P&L and Balance Sheets etc just ti please the IRD seems like a damn lot of work that could end up being in vein.

as a sole trader you still have to produce a p&l and a balance sheet. If you’re in business, the structure does not inform your obligations for reporting and recording correctly.

 

think of all of those small cafes out there. Even if they are small turnover they still need to produce summaries of results.

 

If you buy a laptop for $2k, then you must depreciate it over time - you can’t just expense it.





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656 posts

Ultimate Geek


  #2343769 26-Oct-2019 13:27
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antoniosk:

 

negan: So I’m seeing that the myths are still alive and well out there!
Just reiterating that I’m starting life as a contractor and not sure if it’ll last.
So The comment about shutting down a company and having to do P&L and Balance Sheets etc just ti please the IRD seems like a damn lot of work that could end up being in vein.

as a sole trader you still have to produce a p&l and a balance sheet. If you’re in business, the structure does not inform your obligations for reporting and recording correctly.

 

think of all of those small cafes out there. Even if they are small turnover they still need to produce summaries of results.

 

If you buy a laptop for $2k, then you must depreciate it over time - you can’t just expense it.

 

 

If you are a sole trader, to whom are you reporting?





BlinkyBill


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  #2343900 26-Oct-2019 21:36
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If all you are doing is a typical small trader thing like fixing computers or designing websites there is likely minimal benefit in a company. But at a certain point, companies can have less-obvious benefits, especially when dealing in spheres where suppliers or other parties expect/require an official and searchable registered entity.

 

logo:

 

Maybe from the IRD

 

But be aware that if you are taking too much money out of the company as "drawings" (technically overdrawing your shareholders current account), that's technically monies you owe the company and the liquidator can go to you personal to recover it.

 

 

1. Not for PAYE AFAIK but other tax types - probably

 

2. Do not take money out as drawings unless you are repaying funds introduced. Take it out as "salary and wages". If you are a shareholder this does not have to be subject to PAYE - just file it on your personal IR3.

 

 





Integrity Tech Solutions @ Norsewood, New Zealand




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Wannabe Geek


  #2344101 27-Oct-2019 13:10
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antoniosk:

negan: So I’m seeing that the myths are still alive and well out there!
Just reiterating that I’m starting life as a contractor and not sure if it’ll last.
So The comment about shutting down a company and having to do P&L and Balance Sheets etc just ti please the IRD seems like a damn lot of work that could end up being in vein.

as a sole trader you still have to produce a p&l and a balance sheet. If you’re in business, the structure does not inform your obligations for reporting and recording correctly.


think of all of those small cafes out there. Even if they are small turnover they still need to produce summaries of results.


If you buy a laptop for $2k, then you must depreciate it over time - you can’t just expense it.



As a sole trader I have income and expenses so not the traditional P&L me thinks.
Either my expenses are categorised as equipment (deprecated) or they are not.
Unless I have stock/inventory or employees I don’t need to be a company.
My income will come via a 3rd party sometimes- recruiter, and they may take some withholding tax ( never the right amount as tax inevitably isn’t a round number)
I pay ACC once my tax return is filed and if I owe more than $2500 in income tax then I’ll be put in a provisional tax regime. Trick is not to let that happen by having a good calculation and deduction set up similar to AIM.
So not sure if you are an accountant but it sounds like you have your own opinions that don’t ring true in my case.

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Ultimate Geek

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  #2344266 27-Oct-2019 22:01
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I have been a sole trader for 28 years, providing professional services only. A couple of dozen invoices a year at most, relatively low expenses other than client disbursements and little capital equipment. Has worked well. I see no advantage in being a company. GST/tax returns are a pain in the butt of course, especially receipts for multiple small expense items (including chasing suppliers to get legit GST invoices, tracking down one or two that somehow get mislaid, etc). I do use an accountant to do my end of year tax returns but I collate all the data and enter it into a spreadsheet, and do my own GST returns. Being a company would not make preparing the tax returns any easier, short of having an admin assistant. I would recommend keeping an accountant at some point in the loop though.

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