I have company A, in profit, making money, 7 years old. I'm starting Company B and need capital, but don't want to tie the companies together with loans and debt. can I invoice company A from Company B? without providing any services.
I'm not seeing any clear definition about what a company can and can't invoice for.
If this is your own company then you can do what you like, but only after paying your company-tax. You don't even need an invoice, though you could use one if you like, but a non-genuine invoice does not qualify as a tax deduction for your company.
If this is your own company then you can do what you like, but only after paying your company-tax. You don't even need an invoice, though you could use one if you like, but a non-genuine invoice does not qualify as a tax deduction for your company.
Hi Yuyutsa, thanks for the reply.
essentially they are 2 separate companies (both Pty Ltd), so I can't just move it from one bank account to another, or it becomes a loan of sorts.
what's the definition of Non-genuine, it would be a legit invoice, ABN etc. but there's no service as such, not like if I was hanging a door for a client.
Since it is your company and you being the only shareholder, the board of directors (i.e. you) can decide to donate the money in the company (after tax) to anyone, including to another company of yours. An invoice is not required - once the board makes the decision you can simply transfer a sum from the bank account of company A to the bank account of company B - provided of course that you keep sufficient funds in company A to pay its company-tax (25%-30%).
An invoice would not be genuine because the payment is not for a service.
It is not against the law to issue such an invoice, but it would only be a piece of paper that would not entitle your company to any tax deduction.
@Yuyutsu i thought you could only donate to companies that were registered as eligible to receive donations, which company B is not. for something so simple, it's rather complicated.
When donating to an approved charity, you receive a tax deduction.
You can still donate to another company, but you receive no deductions for it - not only that, but it may be counted as taxable income for the other company. Nevertheless, it is not illegal.
@Yuyutsu I'm trying to find a tax efficient way to do this, so looking for options that won't require paying tax on the same money twice. if I move $100k and pay tax at both ends, it's basically 47% of the original sum, it would be cheaper for me to draw it down in wages, pay the 37% and then lend it to the new company. not good at at all.
In most circumstances it would be cheapest to draw the money as franked dividends, rather than as wages, pay tax at your personal marginal rate, then lend the money to your new company.
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