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Sole Trader to Company

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I have a few quesitons for which I would be incredibly grateful to get answers. 

I signed up with a mortgage brokering company last year. They required I be set up as a sole trader. I paid them a fee which included setting up my Cert IV course, access to their systems for carrying out the duties of mortgage broking, mentoring and other operating fees. After a few months of gettng minimal support, I decided to switch to a different company. That company required that I set up a company rather than act as a sole trader. I incurred expenses in 2018-2019, but made no income until July of 2019. My questions are:

1. Am I allowed to carry forward the expenses from when I was a sole trader? 
2. From what I understand, the cost of training to get the necessary certification to be a mortgage broker is considered a start up cost which is a capital expense and cannot be deducted. But, the cost for that certification was actually included in the fees which were mostly operating costs. I don't have a breakdown of the actual start up costs. Provided I can carry those expenses forward, how do I deal with the start up costs that were included in the total fee? 
3. My last question... I've gotten 3 different answers to these questions from 3 diffrernt accountants. I've also gotten 2 different answers from the ATO chat. One was yes to the first question and that all the expenses were deductible for the second. The second person at the ATO said I needed to "sefl-assess" whether the start up costs were a capital expense. How do I go about getting reliable answer so I don't get myself into trouble? 

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Hi @thisone,

 

Thanks for your questions!

 

Generally speaking, when you change business structures, there is a limit on what can be transferred from one entity to the other. This is because each ABN registered belongs to a separate legal entity, and there are different tax implications for each entity type.

 

You may still be able to claim losses as a sole trader, or defer them for a future year for your individual taxation affairs. Some capital assets and start up costs may still be deductible as a sole trader, you will have to check our guide to depreciation and capital expenses here or here(in PDF format for 2019) for more information.

 

Unfortunately, because our tax system is based on self-assessment, even if you act upon advice provided by a tax professional ultimately you will still be responsible for the outcome.

 

The ATO can usually only provide you with general guidance on how tax law may apply to your circumstances, but if you would like something more detailed you may wish to look into other options.

 

I hope this helps, but please let me know if you have any other questions.

 

Rachael B.

1 REPLY 1
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Best answer

ATO Certified

Community Support

Replies 0

Hi @thisone,

 

Thanks for your questions!

 

Generally speaking, when you change business structures, there is a limit on what can be transferred from one entity to the other. This is because each ABN registered belongs to a separate legal entity, and there are different tax implications for each entity type.

 

You may still be able to claim losses as a sole trader, or defer them for a future year for your individual taxation affairs. Some capital assets and start up costs may still be deductible as a sole trader, you will have to check our guide to depreciation and capital expenses here or here(in PDF format for 2019) for more information.

 

Unfortunately, because our tax system is based on self-assessment, even if you act upon advice provided by a tax professional ultimately you will still be responsible for the outcome.

 

The ATO can usually only provide you with general guidance on how tax law may apply to your circumstances, but if you would like something more detailed you may wish to look into other options.

 

I hope this helps, but please let me know if you have any other questions.

 

Rachael B.