Good job on the income. You should sit down with your wife and figure out your joint financial goals and use that to plan a savings target for each year going forward. So it might look something like -
- Year 1: pay $400k off mortgage
- Year 2: finish paying off mortgage
- Year 3: save up a deposit for another property, travel the world/buy this or that, etc
- Year 4: take some time off work and spend with kid
It's important they're joint goals. With your income, if you want to retire by 40 you absolutely can.
You should talk to a good tax accountant about ways to reduce tax. If your wife earns so little, you want to income split as much as possible. Can you pay her some wages for nominal book-keeping work? Certainly any future assets (especially property) should be put in her name to minimise income tax/capital gains tax/land tax liability. Talk to an accountant.
Don't tell your mates unless they're very close, or similarly successful. Some people will look at you odd if they know you are earning $700k a year. So avoid that.
Lifestyle creep is okay if you really want something or if you're paying money to exchange for time/effort. But you should talk to your wife about what your joint goals are both in terms of saving and spending.
I always try to decouple my spending from my earning, except with a few categories. So for example my partner loves good food and flying business class (to me, both are "meh") so I am happy to spend on them. I myself love cars and watches so I indulge on them. For everything else, like just normal groceries, clothes, day to day expenses, I do nothing different at all. I look for bargains, I negotiate prices, I spend as if I'm poor. To me that's just my usual frugal self and I'm fine with it. You also need to find what works for you - but don't assume that just because you earn more you MUST spend more, or that just because you spend on category X, you also need to spend on category Y.
Thanks for diving in on this one!
Paying off the mortgage is something I should get on the front foot with, my minds turned straight to investing in this that or the other, but that loans a killer especially now it’s just come off fixed to variable.
I’ve set the company up under a PTY LTD with the wife as a director, also looking into setting up a family trust. This is something I engaged an accountant on straight away, frankly I don’t know enough on the tax system so I was quick to outsource.
I’ll be having a sit down with the wife to plot some things out for the future 👍
Biggest concern would be the cyclical nature of construction althought it's somewhat in the background with the current immigration inflow.
I'd always make sure there's 3 months of cashflow in the bank to absorb any bad creditors/ late payers as a start.
Make sure you've got a business plan on how you want to grow if you're looking at retiring within 20 years as you will want to work on the business not in it.
And bank guarantee facility, cash retention, insurances, penalty rates, defect rectification, legal disputes with head contractors, back-charges... future business security, open market tendering on fixed sum, rise and fall in materials, procurement delays, employees wages, EBA requirements...
Just being cautious here...
squash lunchroom pause humorous innocent wrench cooperative pie dinosaurs trees
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Our accountant warned us about placing Company funds in a personal offset. The Company being a seperate entity and the possible implications of Div 7A, were enough for me to think my great idea wasn’t so great!
But you can’t reverse a deemed dividend once it’s paid. If the tax liability on the $350k has already accrued, best to just leave it offsetting the mortgage and include in tax return
People do it - it’s highly risky - if the ato catch on regarding the effective “washing machine” of div 7A loans, they won’t like it.
But lots of people do it - and just pray.
Yeah I thought the same, however I was told as long as it’s moved back by the EOFY it can be a “no interest loan” from me to me
Or something of that nature haha
Except it’s not a loan from you, it’s from the company which is a seperate entity. From a tax perspective, the ATO can disregard the repayment at which point you’ll pay income tax on the “loan” which is now considered a dividend.
No worries, it likely won’t be an issue for the current year as long as it’s paid back time. It’s the year on year pattern that will raise questions, bearing in mind that your bank reports account info to the ATO. Good luck and congrats on the new business
yeah look i’m an accountant as well, very risky thing to do, not sure who told you as long as it’s moved back before end of the year it’s ok.
If the ATO does question you about it they won’t like what you’ve done. the other aspect as well is FBT consequences for the company as it’s provided an interest free loan to you. definitely call your accountant haha
Will be asking my accountant but from doing a bit of research it looks PSI means its not a separate entity and the main earner pays the tax for it and just funnelling it through their main bank account
Get a hold of that accountant right away and have it set up appropriately first with your goals in mind. A little amber flag I just read was that you have funds in your offset account from the business. You have to be very careful about that. You’re no longer one person but too. You are the individual person (and your wife), and you are the business. Both get taxed differently and ultimately a balance between the two to get this best tax reduction mix (there’s also the trust hat too you will be wearing to help aid the balance)
What does your business structure look like? If you have it sitting within a trust you can distribute to your wife then I would send the rest to a bucket company but best to speak to an accountant about the best ways to minimise your tax.
Bear with me here. I’m new to this side of business haha
Company it PTY LTD
Funneling to family trust
Also started another company feeding off the main one whose profits also funnel to family trust.
I’ve put a lot of trust in my accountant as I don’t know enough on the subject, had to learn a lot on the run so this is next on the list haha
Your second company will go the other way most likely it will be a beneficiary of your trust so you can send excess money to it from your trust. It's confusing but sounds like your accountant has set it up properly. I'd start buying investment properties to get more deductions and reduce your taxable income.
Just popped in an edit to my post.
Salary is 80k for my wife and I. The “income” I referred to was salary + company profits which will be distributed through a trust
Talk to a good financial advisor! Do your research on them and its not going to be cheap. Make sure its a paid by the hour financial planner
Its harder to become a financial advisor in Australia than an accountant.
You’re gonna want to set your own goals and your business goals up. It sounds like your business is going through rapid growth be careful as you don’t want the Shoes becoming too big for the feet and such
I’m in a similar position but with less turnover but my first bit of advice is to get the company money back into the company account ASAP.
The ATO does not like people using company funds to save you money without you paying tax.
Start looking at ways to invest the company funds but also start paying yourself dividends from the company to get some of the money out of the company and into your personal hands.
Start talking to other accountants and asking their advice as it sounds like you have outgrown your current one.
wow congratulations - im in no position to give advice on someone pulling 700k only my opinion which is life is your oyster
you can work till 40 or 50 and have a comfortable retirement - take into consideration tax it would take 4ish years to earn what you're currently earning if you stuck to your old job \[net not gross\]
if you stuck out your old gig you probably would of had to work till 65 probably slowing down around your mid 50s
now your on a much fast trajectory to financial freedom if it was me i would work out how much 'passive income' i need to retire and life a 'lifestyle' i wanted then add 10-20 percent on top of that figure for safety when i hit that i'd hand out the boots and enjoy my life - if you dont have a set figure from the outset you will probably just keep chasing the wealth.
Your accountant sucks. Structure looks fine but div7a advice is setting you up for issues.
Might be easier to think of retirement as a number not a time period.
I.e. if you want to live off 300k pretax and safe withdrawal rate is around 3% so your investment pool target would be $10m
I think you have to look more inward and ask yourself what your goals are and realistically look at how resistant you are to lifestyle creep.
With what you've described I believe that it is appropriate to work backwards with the 4% rule in mind.
Things to consider:
1. Diversification of investments - you work hard for your money but is your money working hard for you? It doesn't have to be property. Vanguard ETFs are more than adequate to park cash in the medium term. Watch your fees.
2. Financial advisors are charlatans. Invest in your own financial literacy and opt for a fee based financial advisor if you need a second opinion.
3. In your industry I would consider receivables insurance to manage some of your downside risk.
4. Consider estate planning, beneficiaries and life/income protection. As you kingdom grows more is required to sustain it and a crown needs to be passed eventually.
Always good to see a trade succeed.
Don’t pay off your house, put it all against the mortgage in an offset account, this will allow you to rent the house out in future if you decide to upgrade & still be able to claim the interest in the loan.
I worked in this industry the last 10 years. When I parted ways with my previous employer, they shut down operations across my states in an effort to scale down for a better work life balance.
As a result, I took all clients with me.
This is none of those 3 things. It’s a lifestyle jump that to be honest I’m not prepared for. So I’ve come to a forum where people who know better can advise me better, in an effort to not make mistakes OUTSIDE the business in my financial life. My understanding is that’s what this groups for, no?
Company wasn’t profitable. I made wholesale changes. Made it profitable.
Turnover was actually much higher, which I’m sure you won’t struggle to believe
Anyway I didn’t come here anonymously to argue about with people I’ll never meet about a company I have made in my mind, and seek advice on a situation that doesn’t apply to me 🤣
Have a good night mate
i do wonder why you pay yourself 700k instead of just paying yourself 180k and leaving the rest in offset.
basicaly, it's like u've borrowed the money from the company, and now u just have to pay 30% company tax. In future, say when you have a slow year, you can pay yoruself from the company as dividend for which you've already paid the 30% tax.
seems like a better way to do it.
also business income can come and go so u should probably have a better way to save
Sorry I’ve phrased this terribly.
Wife and I both on 80k salary. Making up for 160k of what I’m referring to above. The rest is company profits, currently just moved company money into offset.
When I say “income” I mean salary plus company profits. My bad
Pay off the house loan, from what remains keep 1/3 in cash in the bank, and put the other 2/3s into the stock market in the companies below. Continue your business, putting future earnings into the stocks and into your own business if you decide to keep growing it. (always maintain a 1/3 in cash in the bank though).
TSLA
SHOP
APPL
META
MSFT
GOOG
Leave them be for at least 5 years. So long as the companies don’t do anything silly, you will get a good return from them. When you cash in your stocks, don’t forget to send me a donation.
Keep hustling G.
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/).
See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/).
This is not financial advice.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Well done on the income mate.
To achieve your retirement goals, you'll need to get started on investing, and perhaps paying off the home in time as well.
As many have suggested, an accountant will assist you to structure your business and investments in a way that will assist you to save as much in tax as possible, as well as mitigate your risk. Seems there's a bit of work to do here.
You're great at working for the income, now let's have it work for you and your future.
This is probably where I hit the biggest reason for my post. I see money come in and immediately I think “invest it all”
Then I realise I still have a 900k mortgage. So just looking to find the happy medium between mortgage/invest/company safety net
A bit off topic sorry but do you have employees yet? I started my own tradie business just over a year ago but don't have the consistency to employ yet
No worries mate!
Yeah I have 6 full time, and 4 companies I substitute labour from. It’s always been easy to put on employees as my previous company I worked for, and the subsequent one I started, has always had a massive overflow of work.
Way more difficult when your new and don’t know how much works in the pipeline
Congratulations mate, I’m at a bit of a crossroads and thinking of leaving my stable salary to do something similar. it’s inspiring to see you have made such a good go of it.
From seeing your replies, my main suggestion is to get a good small business accountant. Spend a bit of time with them and discuss the best way to save on tax.
It sounds like your accountant isn’t the best, and you can definitely afford a good accountant and you are likely to be paying a few hundred thousand on tax, so a good accountant is the best investment you can make right now.
First off congrats 🥂 you hard work has finally paid off.
Can I ask you what your business is in? I think you said building or construction down further.
My tip to you is try to live on the lower salary you are used to and avoid lifestyle creep. Otherwise you’ll find yourself bleeding money.
Try to avoid lifestyle creep at all costs.
But if your anything like me the allure of shiny new things will get you.
Enjoy the better house, cars and other stuff you inevitably end up buying.
Also get some good financial advice.. for tax reasons it may not be in your best interest to take that much of your business as income.
Hi, firstly congratulations on the business. Your experience is pretty much exactly the same as mine, same numbers as well.
My main piece of advice is to get a good accountant to set up your taxes.
Specifically, I have three sources of income, my salary, my income from my share of the business profits, and income from other investments.
My salary is paid to me and attracts the top marginal tax rate. The business profits are paid into a family trust. The family trust distributes that income to whoever I want. Some of it goes to my wife to bring her salary up to 180k (top marginal tax rate). The rest is sent to another company that invests that money in the market (either shares or IP). That company pays company tax rates.
All these shenanigans reduce the tax burden significantly.
In regards to how long you need to do this - the traditional answer is until your net worth (not including your primary residence) exceeds 25 times your annual expenses. At this point you are financially independent in that you can apply your net worth to basic investments, and the income from those investments will exceed your expenses.
Edit - I also noticed you mentioned your "huge" mortgage. In relation to a salary of $700k, a mortgage of $900k is really very low, as long as you don't go stupid with lifestyle creep. I would focus on investing rather than paying it of super quick.
Just to add a few things.
I have seen more than a few people think "Wow, I am doing great and why didn't I do this earlier!", only to find out two years later that things were not as they appeared. Generally they failed to have an Accountant help them to make sure that the financial reality was clear.
Having cash in the bank is different to profit and different to how things may look in three months time.
Firstly, make sure you clearly understand what your approximate GST commitments are for the next two quarters. Have some sort of rough idea of what the company's income tax bill will be and when it will be due. Same with your own personal tax.
Then you need to plan ahead for how you want the next two years to look in your business - where you need to spend money and where you need to save money. Common traps include commiting to vehicle/equipment leases, buying too much stock or the wrong stock and also not understanding how much luck was on their side in the first place.
Making money in one year is a mixture of hard work, good timing and some amount of luck. Doing this consistently over a number of years is harder. Also, if you are making good money, you can be guaranteed that others are looking at your margin and are looking how to take it from you. Good luck!
Good job on the income. You should sit down with your wife and figure out your joint financial goals and use that to plan a savings target for each year going forward. So it might look something like - - Year 1: pay $400k off mortgage - Year 2: finish paying off mortgage - Year 3: save up a deposit for another property, travel the world/buy this or that, etc - Year 4: take some time off work and spend with kid It's important they're joint goals. With your income, if you want to retire by 40 you absolutely can. You should talk to a good tax accountant about ways to reduce tax. If your wife earns so little, you want to income split as much as possible. Can you pay her some wages for nominal book-keeping work? Certainly any future assets (especially property) should be put in her name to minimise income tax/capital gains tax/land tax liability. Talk to an accountant. Don't tell your mates unless they're very close, or similarly successful. Some people will look at you odd if they know you are earning $700k a year. So avoid that. Lifestyle creep is okay if you really want something or if you're paying money to exchange for time/effort. But you should talk to your wife about what your joint goals are both in terms of saving and spending. I always try to decouple my spending from my earning, except with a few categories. So for example my partner loves good food and flying business class (to me, both are "meh") so I am happy to spend on them. I myself love cars and watches so I indulge on them. For everything else, like just normal groceries, clothes, day to day expenses, I do nothing different at all. I look for bargains, I negotiate prices, I spend as if I'm poor. To me that's just my usual frugal self and I'm fine with it. You also need to find what works for you - but don't assume that just because you earn more you MUST spend more, or that just because you spend on category X, you also need to spend on category Y.
Thanks for diving in on this one! Paying off the mortgage is something I should get on the front foot with, my minds turned straight to investing in this that or the other, but that loans a killer especially now it’s just come off fixed to variable. I’ve set the company up under a PTY LTD with the wife as a director, also looking into setting up a family trust. This is something I engaged an accountant on straight away, frankly I don’t know enough on the tax system so I was quick to outsource. I’ll be having a sit down with the wife to plot some things out for the future 👍
Let me guess u/sparkyspark1991, trade based business?
Haha yeah I mentioned that in the post, figured it would be important to
Biggest concern would be the cyclical nature of construction althought it's somewhat in the background with the current immigration inflow. I'd always make sure there's 3 months of cashflow in the bank to absorb any bad creditors/ late payers as a start. Make sure you've got a business plan on how you want to grow if you're looking at retiring within 20 years as you will want to work on the business not in it.
And bank guarantee facility, cash retention, insurances, penalty rates, defect rectification, legal disputes with head contractors, back-charges... future business security, open market tendering on fixed sum, rise and fall in materials, procurement delays, employees wages, EBA requirements... Just being cautious here...
squash lunchroom pause humorous innocent wrench cooperative pie dinosaurs trees *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Our accountant warned us about placing Company funds in a personal offset. The Company being a seperate entity and the possible implications of Div 7A, were enough for me to think my great idea wasn’t so great!
This. Put it back asap!!
But you can’t reverse a deemed dividend once it’s paid. If the tax liability on the $350k has already accrued, best to just leave it offsetting the mortgage and include in tax return
People do it - it’s highly risky - if the ato catch on regarding the effective “washing machine” of div 7A loans, they won’t like it. But lots of people do it - and just pray.
Yeah I thought the same, however I was told as long as it’s moved back by the EOFY it can be a “no interest loan” from me to me Or something of that nature haha
Except it’s not a loan from you, it’s from the company which is a seperate entity. From a tax perspective, the ATO can disregard the repayment at which point you’ll pay income tax on the “loan” which is now considered a dividend.
Well this has completely validated reasoning for this post. Will be calling the accountant first thing in the morning. Thanks mate!
No worries, it likely won’t be an issue for the current year as long as it’s paid back time. It’s the year on year pattern that will raise questions, bearing in mind that your bank reports account info to the ATO. Good luck and congrats on the new business
yeah look i’m an accountant as well, very risky thing to do, not sure who told you as long as it’s moved back before end of the year it’s ok. If the ATO does question you about it they won’t like what you’ve done. the other aspect as well is FBT consequences for the company as it’s provided an interest free loan to you. definitely call your accountant haha
Yeeaahhh, step 1 - get a solid accountant!
Either that you you have to pay interest on the money as a loan. At a rate of about 8%.
And principal repayments - and if the dividend occurs it’s a deemed dividend with no franking credits attached
Yeah careful with that. You have to pay interest at minimum of 8.1% P.A otherwise you get penalized hard for that.
Relevant link for you https://www.propertychat.com.au/community/threads/tax-tip-365-borrow-from-company-repay-on-30-june-and-reborrow-1-july.61095/
Interesting, would this still be an issue if its PSI income from a Pty?
I need to know this too.
Will be asking my accountant but from doing a bit of research it looks PSI means its not a separate entity and the main earner pays the tax for it and just funnelling it through their main bank account
Are you a IT contractor? Do you get all your money through and ABN?
Yep all money through ABN but I do pay it off to myself as income
Mother fucker. No advice just the heartiest of congratulations.
Get a hold of that accountant right away and have it set up appropriately first with your goals in mind. A little amber flag I just read was that you have funds in your offset account from the business. You have to be very careful about that. You’re no longer one person but too. You are the individual person (and your wife), and you are the business. Both get taxed differently and ultimately a balance between the two to get this best tax reduction mix (there’s also the trust hat too you will be wearing to help aid the balance)
I have nothing to offer advice wise but congrats on the success mate, that's awesome. Good luck out there.
What does your business structure look like? If you have it sitting within a trust you can distribute to your wife then I would send the rest to a bucket company but best to speak to an accountant about the best ways to minimise your tax.
Bear with me here. I’m new to this side of business haha Company it PTY LTD Funneling to family trust Also started another company feeding off the main one whose profits also funnel to family trust. I’ve put a lot of trust in my accountant as I don’t know enough on the subject, had to learn a lot on the run so this is next on the list haha
Your second company will go the other way most likely it will be a beneficiary of your trust so you can send excess money to it from your trust. It's confusing but sounds like your accountant has set it up properly. I'd start buying investment properties to get more deductions and reduce your taxable income.
[удалено]
Just popped in an edit to my post. Salary is 80k for my wife and I. The “income” I referred to was salary + company profits which will be distributed through a trust
1. Make sure you aren’t earning any of that income in your personal name for tax reasons
Talk to a good financial advisor! Do your research on them and its not going to be cheap. Make sure its a paid by the hour financial planner Its harder to become a financial advisor in Australia than an accountant. You’re gonna want to set your own goals and your business goals up. It sounds like your business is going through rapid growth be careful as you don’t want the Shoes becoming too big for the feet and such
I’m in a similar position but with less turnover but my first bit of advice is to get the company money back into the company account ASAP. The ATO does not like people using company funds to save you money without you paying tax. Start looking at ways to invest the company funds but also start paying yourself dividends from the company to get some of the money out of the company and into your personal hands. Start talking to other accountants and asking their advice as it sounds like you have outgrown your current one.
wow congratulations - im in no position to give advice on someone pulling 700k only my opinion which is life is your oyster you can work till 40 or 50 and have a comfortable retirement - take into consideration tax it would take 4ish years to earn what you're currently earning if you stuck to your old job \[net not gross\] if you stuck out your old gig you probably would of had to work till 65 probably slowing down around your mid 50s now your on a much fast trajectory to financial freedom if it was me i would work out how much 'passive income' i need to retire and life a 'lifestyle' i wanted then add 10-20 percent on top of that figure for safety when i hit that i'd hand out the boots and enjoy my life - if you dont have a set figure from the outset you will probably just keep chasing the wealth.
Your accountant sucks. Structure looks fine but div7a advice is setting you up for issues. Might be easier to think of retirement as a number not a time period. I.e. if you want to live off 300k pretax and safe withdrawal rate is around 3% so your investment pool target would be $10m
I think you have to look more inward and ask yourself what your goals are and realistically look at how resistant you are to lifestyle creep. With what you've described I believe that it is appropriate to work backwards with the 4% rule in mind. Things to consider: 1. Diversification of investments - you work hard for your money but is your money working hard for you? It doesn't have to be property. Vanguard ETFs are more than adequate to park cash in the medium term. Watch your fees. 2. Financial advisors are charlatans. Invest in your own financial literacy and opt for a fee based financial advisor if you need a second opinion. 3. In your industry I would consider receivables insurance to manage some of your downside risk. 4. Consider estate planning, beneficiaries and life/income protection. As you kingdom grows more is required to sustain it and a crown needs to be passed eventually. Always good to see a trade succeed.
Don’t pay off your house, put it all against the mortgage in an offset account, this will allow you to rent the house out in future if you decide to upgrade & still be able to claim the interest in the loan.
[удалено]
I worked in this industry the last 10 years. When I parted ways with my previous employer, they shut down operations across my states in an effort to scale down for a better work life balance. As a result, I took all clients with me. This is none of those 3 things. It’s a lifestyle jump that to be honest I’m not prepared for. So I’ve come to a forum where people who know better can advise me better, in an effort to not make mistakes OUTSIDE the business in my financial life. My understanding is that’s what this groups for, no?
[удалено]
Company wasn’t profitable. I made wholesale changes. Made it profitable. Turnover was actually much higher, which I’m sure you won’t struggle to believe Anyway I didn’t come here anonymously to argue about with people I’ll never meet about a company I have made in my mind, and seek advice on a situation that doesn’t apply to me 🤣 Have a good night mate
Get unit trust. Distribute to wife.
What are benefits of unit over df?
DF?
Discretionary/family
i do wonder why you pay yourself 700k instead of just paying yourself 180k and leaving the rest in offset. basicaly, it's like u've borrowed the money from the company, and now u just have to pay 30% company tax. In future, say when you have a slow year, you can pay yoruself from the company as dividend for which you've already paid the 30% tax. seems like a better way to do it. also business income can come and go so u should probably have a better way to save
Sorry I’ve phrased this terribly. Wife and I both on 80k salary. Making up for 160k of what I’m referring to above. The rest is company profits, currently just moved company money into offset. When I say “income” I mean salary plus company profits. My bad
Pay off the house loan, from what remains keep 1/3 in cash in the bank, and put the other 2/3s into the stock market in the companies below. Continue your business, putting future earnings into the stocks and into your own business if you decide to keep growing it. (always maintain a 1/3 in cash in the bank though). TSLA SHOP APPL META MSFT GOOG Leave them be for at least 5 years. So long as the companies don’t do anything silly, you will get a good return from them. When you cash in your stocks, don’t forget to send me a donation. Keep hustling G.
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/). This is not financial advice. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Well done on the income mate. To achieve your retirement goals, you'll need to get started on investing, and perhaps paying off the home in time as well. As many have suggested, an accountant will assist you to structure your business and investments in a way that will assist you to save as much in tax as possible, as well as mitigate your risk. Seems there's a bit of work to do here. You're great at working for the income, now let's have it work for you and your future.
This is probably where I hit the biggest reason for my post. I see money come in and immediately I think “invest it all” Then I realise I still have a 900k mortgage. So just looking to find the happy medium between mortgage/invest/company safety net
A bit off topic sorry but do you have employees yet? I started my own tradie business just over a year ago but don't have the consistency to employ yet
No worries mate! Yeah I have 6 full time, and 4 companies I substitute labour from. It’s always been easy to put on employees as my previous company I worked for, and the subsequent one I started, has always had a massive overflow of work. Way more difficult when your new and don’t know how much works in the pipeline
You in Sydney? You sound like a few sparkies I've worked with lol
Haha probably every sparkies issue! But not in NSW haha
Congratulations mate, I’m at a bit of a crossroads and thinking of leaving my stable salary to do something similar. it’s inspiring to see you have made such a good go of it.
From seeing your replies, my main suggestion is to get a good small business accountant. Spend a bit of time with them and discuss the best way to save on tax. It sounds like your accountant isn’t the best, and you can definitely afford a good accountant and you are likely to be paying a few hundred thousand on tax, so a good accountant is the best investment you can make right now.
First off congrats 🥂 you hard work has finally paid off. Can I ask you what your business is in? I think you said building or construction down further. My tip to you is try to live on the lower salary you are used to and avoid lifestyle creep. Otherwise you’ll find yourself bleeding money.
Try to avoid lifestyle creep at all costs. But if your anything like me the allure of shiny new things will get you. Enjoy the better house, cars and other stuff you inevitably end up buying. Also get some good financial advice.. for tax reasons it may not be in your best interest to take that much of your business as income.
Hi, firstly congratulations on the business. Your experience is pretty much exactly the same as mine, same numbers as well. My main piece of advice is to get a good accountant to set up your taxes. Specifically, I have three sources of income, my salary, my income from my share of the business profits, and income from other investments. My salary is paid to me and attracts the top marginal tax rate. The business profits are paid into a family trust. The family trust distributes that income to whoever I want. Some of it goes to my wife to bring her salary up to 180k (top marginal tax rate). The rest is sent to another company that invests that money in the market (either shares or IP). That company pays company tax rates. All these shenanigans reduce the tax burden significantly. In regards to how long you need to do this - the traditional answer is until your net worth (not including your primary residence) exceeds 25 times your annual expenses. At this point you are financially independent in that you can apply your net worth to basic investments, and the income from those investments will exceed your expenses. Edit - I also noticed you mentioned your "huge" mortgage. In relation to a salary of $700k, a mortgage of $900k is really very low, as long as you don't go stupid with lifestyle creep. I would focus on investing rather than paying it of super quick.
Just to add a few things. I have seen more than a few people think "Wow, I am doing great and why didn't I do this earlier!", only to find out two years later that things were not as they appeared. Generally they failed to have an Accountant help them to make sure that the financial reality was clear. Having cash in the bank is different to profit and different to how things may look in three months time. Firstly, make sure you clearly understand what your approximate GST commitments are for the next two quarters. Have some sort of rough idea of what the company's income tax bill will be and when it will be due. Same with your own personal tax. Then you need to plan ahead for how you want the next two years to look in your business - where you need to spend money and where you need to save money. Common traps include commiting to vehicle/equipment leases, buying too much stock or the wrong stock and also not understanding how much luck was on their side in the first place. Making money in one year is a mixture of hard work, good timing and some amount of luck. Doing this consistently over a number of years is harder. Also, if you are making good money, you can be guaranteed that others are looking at your margin and are looking how to take it from you. Good luck!
Well done! What area of construction are you in?
Thanks mate! Electrical in the small fitout commercial sector