Sole Trader Having Their Income Go Directly into an Home Loan Offset Account

hdus002 on 25/10/2019 - 22:27

Apologies if this question is silly, just wanted to know if its worth exploring this further with our accountant at all:

So, we have a brand new variable offset account for our home loan. My wife works as a sole trader (ie has a ABN, not a ACN) and does her BAS quarterly. She currently has her income go directly into a business account. Is it legal to have her income go directly into the offset account instead? Reason for asking is, as she only pays her taxes every quarter, this means there will be a decent amount in that account until its quarterly tax time for her, and for that period we can get the benefit of having a larger amount offset. Is this a good thing to do or is there any obvious catches and is a complete non-no?

Financial Home Loan Loan

Comments

  • Findmebargain on 25/10/2019 - 22:39
    +3

    Assuming the business cashflows allow it, I see no issues with a sole trader taking out excess cash (owner drawings) from the business account to put into offset and then when the time comes to pay the quarterly BAS, contribute back some into the business account. Just lump sums going between the offset and business account when needed.

    Your accountant would prefer to see all business income going into the business account in the first instance especially if it is relevant to do a business balance sheet to see where stock and debtors are at. Also if you are running on an accounting software with bank feeds, I don't see how it is feasible having business income paid directly into the offset account.

    • RockyRaccoon on 26/10/2019 - 07:50

      Very good points. Keep the accounts seperate. If you transfer funds even daily (if the funds are large enough) then that makes tracking a lot easier.

      You have to remember that 12 months later someone has to follow what you have done. The more complex the more time it will take, by a bookkeeper or accountant or even an auditor.

      So you save on offsets but pay if it’s hard to follow it adds to higher costs on the accounting side. By keeping it a simple as you can means overall you will save

      All posters so far have been saying the exact same thing

      • jorf on 26/10/2019 - 09:15
        +1

        ABN sole trader (ie. operating under the same personal and business TFN) is very loose. As long as you record outgoing and incoming, no one will care at all about where you put your money. Separate accounts will be helpful for your own accountability, but it's not going to concern anyone else as long as you have it recorded correctly.

        I never really had separate accounts and just recorded expenses and income in a couple of spreadsheets. Tax accountant always said my returns were among the easiest he had to deal with.

    • OZBMate8911 on 26/10/2019 - 07:51
      +1

      The above comment is a very good answer.

      Keep it simple - have a business account for income and expenditure, do a drawing once a week out to the offset (and put the transaction description as such). When BAS time comes, transfer it back in to the business account and pay the ATO from there so it's easier to reconcile the payment.

      Even if you're doing your own books through something like Xero the above will make it marginally easier.

  • GC1 on 25/10/2019 - 23:17

    Aside from possibly extra Accountant fees, there should be no problems - the tax paid by the business is based on invove vs expenditure essentially. An offset account shouldn't affect it.

    Always good to get your Accountant to run an eye over it though.

  • johndowy on 26/10/2019 - 00:03
    +3

    For a sole trader it doesn't matter because what your business earns is what you earn.

    But for ease of record keeping, it is easier to have a separate offset account that you use just for the business. Can you open more than one offset account? If so, do it, it saves a lot.

  • bobbieb on 26/10/2019 - 06:17
    +1

    Having a separate offset account to keep the business money segregated from your personal cash would be a good idea.

    Some banks all more than one offset against a single homeloan - my CBA account does - so it can't hurt to ask.

    • hdus002 on 26/10/2019 - 10:40

      Interesting. So, I could have a 2nd offset account that the sole trader uses just like her normal business account? (ie income comes in to that account?) Will follow this up with the accountant to see if there's any catch to this.

      • bobbieb on 26/10/2019 - 12:48

        Assuming your bank offers more than one offset, yeah.

        But you'd need to talk to your accountant and bank to confirm if there are any technicalities that would stop you, or possibly make it a bad idea.

  • hdus002 on 26/10/2019 - 10:35

    Thanks very much folks for sharing your knowledge on this. Appreciate the comments.

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