Full Transcript for Electricians: Start as a Company or Sole Trader | 167

in the company, like you'll have overheads coming out of it, the cost of business, the cost of running the actual business will come out of it. 00:02:21.439 --> 00:02:27.360 And whatever's left over at the end of it, after everything is paid, all your bass has been paid and stuff like that. 00:02:27.520 --> 00:02:30.000 That's your profit and that's what gets taxed on. 00:02:30.080 --> 00:02:34.879 Now, don't get caught into this loop where you buy a vehicle outright as well. 00:02:35.199 --> 00:03:00.960 Spoken to members about this inside and simplified Sparky, and I think my mind shift changed to buying a new vehicle when you realized that by just doing business correctly, you'll make the profit to pay that extra$1,000 a year you're borrowing to have the ability to have a brand new vehicle under your ass on the road, regarded in your company name, zero kilometres on the clock, brand new tires, doesn't need a service. 00:03:01.199 --> 00:03:02.800 The warranty is such a big thing. 00:03:02.879 --> 00:03:06.719 You could spend 40 grand on a Toyota hi-Ace that's seven years old. 00:03:06.800 --> 00:03:12.240 You drive it down the road and the engine blows up, you're putting an engine in that for God knows what, five, ten grand. 00:03:12.719 --> 00:03:14.639 So I'm going off the beaten track here. 00:03:14.800 --> 00:03:16.240 Back to the company structure. 00:03:16.400 --> 00:03:21.840 I set mine up at a company prior to limited, and I do this as I said, I wanted a separate entity. 00:03:21.919 --> 00:03:32.080 Now, something to be mindful of if you are setting your electrical business up as a separate company and entity, proprietary limited or trust, you have to have a trading license for that company. 00:03:32.159 --> 00:03:36.479 So the company itself has an electronic contractor's license that you nominate yourself to do. 00:03:36.800 --> 00:03:46.960 And with this, you can't just have a proprietary limited company and you're like, sweet, I'm a I'm the director, I'm a licensed electrician, I've got a contractor's license, that that will suffice. 00:03:47.120 --> 00:03:48.159 That isn't the case. 00:03:48.319 --> 00:03:52.159 You need to get a dedicated contractor's license for your company. 00:03:52.319 --> 00:04:00.719 And then technically, you can actually operate your company under a supervisor certificate, which is really weird, but that's just another thing you'll need to know about going company. 00:04:00.879 --> 00:04:05.439 Now, with the Soul Trader, it just you leave yourself open to getting cleaned out. 00:04:05.520 --> 00:04:07.360 Now, God forbid anything happens. 00:04:07.520 --> 00:04:09.280 Usually stuff doesn't happen. 00:04:09.599 --> 00:04:18.079 But let's say, for instance, you're working a very high-end home and you do something very silly and it costs millions of dollars. 00:04:18.240 --> 00:04:23.120 Now that's where insurance will come into play, but there's other things and other liabilities that can happen. 00:04:23.360 --> 00:04:26.959 They can come after you, they can come after your home, your cars. 00:04:27.120 --> 00:04:30.079 That can all be taken from you if you operate as a sole trader. 00:04:30.399 --> 00:04:33.040 And that's one thing, that's one aspect of it. 00:04:33.120 --> 00:04:36.319 But another aspect is the poor man paying twice. 00:04:36.480 --> 00:04:55.360 If you go and you're like, oh, look, I'm starting the business, I want to cheap out on this, and you actually go and you set up your zero, your service med, all that stuff under this specific Soul Trader ABN, what's gonna happen is when you realize, oh, I want to go a company now, you're gonna have to get a new zero account, new service med account. 00:04:55.439 --> 00:04:57.199 It's a mess, it's a transition. 00:04:57.519 --> 00:04:59.279 Do it once from the start, do it right. 00:04:59.600 --> 00:05:01.120 You're gonna end up paying twice for things. 00:05:01.199 --> 00:05:03.040 It's a mess with your accounting side of things. 00:05:03.199 --> 00:05:11.680 Particularly if you operate as a sole trader for maybe a year or two and you backpedal, and then you're like, I want to go to a company now, you'll just pay for stuff twice. 00:05:11.839 --> 00:05:16.560 And if you're like, oh well, I don't have the money to start a company, I'm a so I want to start as a sole trader. 00:05:16.800 --> 00:05:23.920 Put it this way Do you want to pay for things twice or do you want to put the head down, make an extra couple of grand and set up as a fucking company? 00:05:24.079 --> 00:05:32.639 Another thing you're gonna have to do as a company is you're going to have to register to do your BAS, which is your business assessment statement. 00:05:32.879 --> 00:05:36.800 So what that is, it's an accumulation of your P A Y G tax. 00:05:36.879 --> 00:05:46.720 So what you pay yourself, so if you pay yourself, I don't know,$1,000 a week,$2,000 a week, you might have to put aside$500 to$1,000 tax, have to pay at the end of this quarter. 00:05:46.959 --> 00:06:00.560 So with that, along with your GST, so what you buy and purchase, you buy a 40 grand van, there's going to be three, six or four grand-ish give or take in GST that you can claim off of that. 00:06:00.720 --> 00:06:04.319 Now, all you're doing with GST, it seems fantastic that you're claiming GST. 00:06:04.399 --> 00:06:07.600 All you're doing is going around collecting additional tax for the government. 00:06:07.759 --> 00:06:12.079 And if you are consistently getting GST back, you're doing something wrong. 00:06:12.399 --> 00:06:17.920 That is where you're not making money and you're spending spending and you've got you're actually getting a credit. 00:06:18.079 --> 00:06:18.879 That's a bad thing. 00:06:18.959 --> 00:06:19.920 You need to be making payments. 00:06:20.079 --> 00:06:21.920 Making payments is a good thing in business. 00:06:22.160 --> 00:06:27.759 It just shows that you're running the business properly and that you can

earn a living and run a proper business. 00:06:28.079 --> 00:06:30.160 The trust setup is another thing. 00:06:30.240 --> 00:06:39.120 Now, I don't have my full bearings of how trusts operate, but all I know is that a trust is essentially, let's put it as a house. 00:06:39.199 --> 00:06:42.480 So your house is, let's just say, your entire company. 00:06:42.639 --> 00:06:49.120 You can set up a unit trust, which is going to be where the GSD gets paid, your wages get paid, and all that stuff gets paid. 00:06:49.279 --> 00:06:53.040 You can then have other rooms in the house, which can be family trusts. 00:06:53.279 --> 00:06:56.639 So you could have a family trust with you and your partner in there. 00:06:56.800 --> 00:07:03.279 You might have another family trust of your brother who's part of the company or sister, and their family might be in another trust. 00:07:03.439 --> 00:07:06.720 Now, with this, what happens with trusts is money waters down. 00:07:06.800 --> 00:07:11.600 So you can take the earnings from the company, you can trickle to family A, to family B. 00:07:11.759 --> 00:07:14.399 They might have more trusts off of that trust. 00:07:14.480 --> 00:07:18.240 And it's just, it keeps dripping down and dripping down that it's beneficial for tax. 00:07:18.480 --> 00:07:27.439 Now, with that, there's been a lot of rule changes lately with taxation, trusts, capital gains tax, that you really have to speak to your accountant with this. 00:07:27.519 --> 00:07:30.639 And that this is why I say this is not financial advice. 00:07:30.720 --> 00:07:33.680 This is purely what I've done is I've set myself up as a company. 00:07:33.839 --> 00:07:36.560 I only have a gist of how trusts work. 00:07:36.800 --> 00:07:37.040 Why? 00:07:37.120 --> 00:07:38.639 Because I'm not a fucking accountant. 00:07:38.800 --> 00:07:40.079 That is who you have to speak to. 00:07:40.160 --> 00:07:51.920 And you have to speak to a good accountant who's got your back and will look after you, that they set you up in the best possible way, that they're not just like slap dash, get this done and set this person up, it'll be fine. 00:07:52.000 --> 00:07:57.759 And then you realize down the track you didn't really question them, and then you've set up the company incorrectly and you want to do it again. 00:07:57.920 --> 00:08:05.920 So always have a good account and have a good chat with the accountant and make sure that it's beneficial and it works best for you and particularly your family. 00:08:06.079 --> 00:08:19.759 So, for example, if your spouse isn't working and you're the breadwinner, a trust format may be a better way to set that up where the company trickles, the company takes in the unit trust and it trickles down to the family trust. 00:08:19.920 --> 00:08:30.240 And you may be able to give, if you've got kids over specific ages, you might be able to give them$18,000 each uh tax-free into their accounts, hypothetically. 00:08:30.399 --> 00:08:39.840 But if I was to give my honest opinion, how you should start your company today, I would say to you, start as you mean to go on, start as a company if not a trust. 00:08:39.919 --> 00:08:41.759 I would not start as a sole trader. 00:08:41.840 --> 00:08:46.240 It's just too much is on you, and it's good to have a separation as well. 00:08:46.399 --> 00:08:55.519 That you've got your personal like tax file number or whatever, and you've got your company set up, and the company would end up paying that tax file number that you've got. 00:08:55.759 --> 00:09:05.200 So that is my two cents on what I would what I think honestly think about the company setup, the company structure, how I would suggest to people to start companies. 00:09:05.440 --> 00:09:06.240 Essentially, that's it. 00:09:06.320 --> 00:09:08.000 So there's the question answered.