Whether you’re a director, shareholder, trustee, or beneficiary, using business money and assets for personal purposes in Australia without the proper processes can mean costly tax consequences.
When you operate your business through a company or trust, it’s important to understand that your business is a separate legal entity — and that means its money and assets aren’t yours to use as you like.
✅ Who Needs to Read This?
This information is relevant if you are:
- A director, shareholder or employee of a company running a small business
- A trustee, beneficiary or employee of a trust operating a small business
- A director of a corporate trustee of a trust
- An associate of a shareholder, such as a spouse or family member
💼 Common Ways Business Funds or Assets Are Used Personally
Using company or trust funds for personal purposes is not illegal — but it must be correctly handled and reported. Here are the most common methods:
1. Salary, Wages or Directors’ Fees
If you’re paid a salary or fee by the business, that income must be declared in your individual tax return. The business must:
- Register for PAYG withholding
- Report payments through Single Touch Payroll (STP)
- Make superannuation contributions
💡 Tip: If you’re moving from sole trader to company, this is a big change. The business pays you, and you report that income separately.
2. Fringe Benefits
If the business provides perks like personal use of a company car or holiday home, these may be considered fringe benefits and subject to FBT (Fringe Benefits Tax).
The business:
- May claim a deduction
- May have to lodge an FBT return and pay applicable tax
- Must maintain records showing how benefits are calculated
3. Dividends and Trust Distributions
If you’re a shareholder, you may receive dividends from company profits. If you’re a trust beneficiary, you may receive trust distributions.
In both cases:
- You must report the income in your individual tax return
- The business/trust cannot claim these distributions as tax deductions
- Franking credits on dividends can reduce your tax liability
4. Loans to Business Owners or Associates
Your company or trust can lend you money, but you must follow strict Division 7A rules to avoid the loan being taxed as an unfranked dividend.
To comply:
- Create a written loan agreement with interest and a repayment term (usually 7 years)
- Make minimum yearly repayments
- Report the interest income in the company’s or trust’s tax return
📋 Record-Keeping & Reporting Requirements
You must maintain proper records if:
- You withdraw money from the business
- You use business assets for personal purposes
Refer to Taxation Ruling TR 96/7 for minimum standards. Keeping detailed and accurate records helps to ensure tax compliance.
🚨 What Happens If You Get It Wrong?
Using business funds incorrectly can lead to:
- Division 7A deemed dividends (taxed at your marginal rate)
- Fringe Benefits Tax liabilities
- Loss of deductions for business expenses
- Possible penalties or interest from the ATO
Example:
Tony pays for his house painting using his company’s account. His bookkeeper flags it. Tony repays the company before the tax return is due, avoiding Division 7A consequences. Lesson? Stay on top of private use of business funds.
✅ Best Practices to Stay Compliant
- Keep business and personal accounts separate
- Use formal agreements for loans or benefits
- Review transactions regularly with your bookkeeper or accountant
- Always report payments or benefits correctly
- Talk to your accountant and registered tax agent if you’re unsure
📚 Using Business Money and Assets for Personal Purposes Australia – Final Thoughts
Treat your company or trust like a separate person — because legally, that’s what it is. While you can access business funds and assets, you need to follow the right procedures to avoid headaches later.
For full details, see the ATO’s official guidance here:
👉 Using your business money and assets for private purposes
Disclaimer: The information provided in this article is intended for general informational purposes only and should not be relied upon as legal, financial or any other type of professional advice. The content presented here is not tailored to individual circumstances, and therefore, readers should not act upon this information without seeking appropriate professional guidance specific to their unique situation. The author and publisher of this article disclaim any liability or responsibility for any loss or damage that may arise from reliance on information contained in this article.