I am in a process to register a company for tax purposes, is it possible to loan the money to my company so that it can purchase a vehicle and then lease that same vehicle from my company so that I can work in ride share, confusion here is that then I will be Director as well as client of the company, are there any laws about this?
Hi Jay8, I'll give you some things you may wish to consider before going ahead with your idea.
Rideshare platforms generally require that you trade as a sole trader in your individual capacity.
Did you receive any advice on this structure or plan? What are you trying to achieve?
Let's think this through a little.
1. Director lends $35,000 to ABC company.
2. ABC Coy buys the director's car at market value / arms length for $35,000, pay stamp on transfer for the new registration, insurance, etc.
3. Company is a small business in the business of leasing motor vehicles, and claims the full $35,000 as an immediate deduction.
4. ABC company leases the vehicle back to the director at market rates. Lets say it's 35,000 over an effective 8 years, so 4375, so lets round it up to 5000 hire fee.
5. ABC coy makes a loss in the first year and has (30,000) loss, and the director would have to inject more than $35,000 to cover stamp, registration, insurance.
6. Director is also paying lease fees into the ABC coy, so now there is a little less than $5000 sitting in the company bank account doing nothing.
7. Later down the track, company may need to review fringe benefits tax return or employee contributions for the private use of the vehicle being used by an employee, director or shareholder of the company, which may result in more tax to pay.
Now in the director's tax return, she claims a tax deduction on the hire fee for the $5000.
I don't see a commercial benefit to this arrangement, it just sounds like you are creating an extra company thinking it will save on tax, by accessing the instant asset write off, but really you're now stuck with paying ASIC annual filing fees, company tax return, business bank account fees, you have money trapped in the company that you don't want to draw as wages, and there are no profits to pay as a dividend.
I could be wrong, and welcome anyone else's input who may have this structure in place, or has planned one up similar to this.
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