Understanding the Main 4 Ways Store Owners Get Paid

Every owner and director of a store or small business has to face quite a few problems throughout the course of their operations. Some may be doable, while others can require more involved decision making. How you’re paid by your business and the tax that you are charged for is something that requires great thought.


The payment that owners receive from their company can come in many different forms. Even though you have the liberty of taking from your store’s profit, the business is still subject to other tax compliance areas when it’s being audited. An example of this is the Goods and Services Tax or Pay As You Go withholding and more.


It’s best to get in touch with an accounting professional who has in-depth knowledge of the Australian Tax Office rules and regulations. That way, you will be able to get advice about how to best get compensation for running the company while still meeting the tax and employment orders in place.


But what exactly are the best ways of paying yourselves? Here are the general ways a store owner may consider when compensating themselves:


Salary


The store owner may be seen as a company employee or business shareholder. There are cases wherein it’s a mix of the two. Just like other workers, they are given a salary. There are a select few that name a price from the revenue of their operations, but it’s more encouraged for owners to set their salary amount on the profit of their business.


Choosing a salary out of their profit ensures that the cash available has already been deducted from the expenses and debts that the business needs to get covered for operations. This salary would still be subject to tax, superannuation, other regulations, just like in a regular payroll service.


Dividends


Dividend payments are also a viable source of income. The way that dividends work is that they are declared on a store owner’s tax returns. Upon doing that, they should be able to get the perks of the franking credit. Franked dividends represent the tax that a company has already paid; this will be going to an owner’s account.


Loans


Another alternative to paying yourself is drawing a loan from a business trust account that’s been set up. A trust can still provide you with your regular income. The difference is that trust funds can often help get tax reductions as the assets are shielded from creditors. There are cases wherein there’s still interest charged by the company.


RESC


RESC or a reportable employer superannuation contribution can also be used to pay the store owner. A RESC is often made as an extra super payment for an employee. This can be utilised as a potential payment option for store owners if the limits of a super contribution have not been exceeded yet. The salary sacrifice helps minimise the owner’s tax to just 15%.


Conclusion


In summary, running the business is still important work that requires to be recompensed. There are different options between setting a salary, getting dividend payments, setting up a trust for a loan and arranging RESCs. Be sure to confide in an accounting professional who can help you in these financial endeavours.


In need of a small business accountant? The ECommerce Accountant offers business advice for online stores and influencers in Australia who need guidance and services in accounting and bookkeeping. Get in touch with us now!





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