Politics 🗳️ NZ Politics

[defensivebomb]

So people do it to save the difference between the 28% company tax rate and their personal 39% (less the interest)?

Apparently our loans are inter-company loans so completely different.

Well, you get the ease of using funds within the business throughout the year, so it is like having a revolving credit account for flexibility by pooling cash between business and personal. A lot of shareholder employees pay themselves small salaries through the year to grow the business but use the company card to buy personal stuff, which gets correctly coded as a shareholder loan. At the end of the year you’ll typically have a loan that your accountant will find the most efficient way to resolve.

If you have paid yourself a small salary, they might neutralise the loan to take you up to the limit of the personal tax bracket. Or neutralise it by way of a dividend, depending on your ICs. If they don’t, you’ll need to pay tax on the interest that you’d otherwise incur if it was a normal loan. You might have some personal tax losses you can offset or whatever

But ultimately, they will usually try to keep company earnings high, as personal tax brackets are typically higher

 

[miket12]

Generally I’d imagine he squares your shareholder loan account at the end of each year (so you don’t carry a loan into the following year, which would need to attract interest otherwise it would be a deemed dividend).

You square the loan up by paying it back or reclassifying it as salary

In the early 90’s, I did contract work for a small residential building company which went under. The two directors/shareholders were a husband and wife and their accountant was their son-in-law.

18 months before the company went into liquidation, it built a house for their daughter and son-in-law (the accountant). The company gave them a loan, which they had interest only on.

Three weeks before the company went into liquidation, the directors decided the loan wasn’t recoverable and wrote it off, so it was no longer an asset the liquidators could go after.

The liquidators took the shareholders to court for trading while insolvent and the accountant to try and recover the loan. The directors couldn’t be touched because their house was in a trust and the accountant wasn’t required to pay back the loan and kept the house.

For us creditors, that meant that we got paid 12 cents in the dollar instead of over 70 cents in the dollar.

To make things worse, the owners of the business had a fencing contractor finish off fencing to four properties on a weekend…. even though he’d arranged for the liquidators to come 8 o’clock Monday morning and knew the contractor wouldn’t get paid.

Both Placemakers and Carters had received preferential Payments over other creditors and just told the liquidators to take them to court to try and recover the amounts knowing it would have used up all the remaining cash for the other creditors.

Pisses me off that successive governments set the rules to make sure they (the IRD) are seen as being secured creditors at the expense of unsecured ones.

 

[wizard of Tauranga]

But ultimately, they will usually try to keep company earnings high, as personal tax brackets are typically higher

… which would explain why all the rich have low personal income.

They still pay the tax but just in their business!

 

[wizard of Tauranga]

In the early 90’s, I did contract work for a small residential building company which went under. The two directors/shareholders were a husband and wife and their accountant was their son-in-law.

18 months before the company went into liquidation, it built a house for their daughter and son-in-law (the accountant). The company gave them a loan, which they had interest only on.

Three weeks before the company went into liquidation, the directors decided the loan wasn’t recoverable and wrote it off, so it was no longer an asset the liquidators could go after.

The liquidators took the shareholders to court for trading while insolvent and the accountant to try and recover the loan. The directors couldn’t be touched because their house was in a trust and the accountant wasn’t required to pay back the loan and kept the house.

For us creditors, that meant that we got paid 12 cents in the dollar instead of over 70 cents in the dollar.

To make things worse, the owners of the business had a fencing contractor finish off fencing to four properties on a weekend…. even though he’d arranged for the liquidators to come 8 o’clock Monday morning and knew the contractor wouldn’t get paid.

Both Placemakers and Carters had received preferential Payments over other creditors and just told the liquidators to take them to court to try and recover the amounts knowing it would have used up all the remaining cash for the other creditors.

Pisses me off that successive governments set the rules to make sure they (the IRD) are seen as being secured creditors at the expense of unsecured ones.

The bad guys wreck the reputation of the rest of us.

I’ve moved a house in the way of the expanded carpark at my tourism buildings and bought a property with a large section and relocated it onto the place and subdividing off the section.

All the immediate neighbours have been really good, but one dude across the street went on a rant one day about rich property developers wrecking the street, tenants going to disturb his peace, etc, etc.

He subsequently apologised and we’ve been on ok terms but the underlying, irrational hatred towards change and changemakers is real.

Ps I’ve wound down several companies, usually after selling the business, but have never not paid anyone, ever!

Pss was probably you MT8