Running your business through a company can offer significant advantages, but having the right structure doesn’t automatically protect you from costly tax mistakes. How you manage company money, meet your obligations, and plan for tax can make all the difference.

In this episode of Latitude Accountants’ video, Jacob Fahmy, Chartered Accountant and Partner at Latitude Accountants, explains five common company tax mistakes that can cost Australian business owners thousands of dollars.

From Division 7A and unpaid superannuation to Fringe Benefits Tax (FBT) and personal director liability, these problems often begin with simple everyday decisions.

Here’s what company owners need to understand and how to avoid unnecessary financial consequences.

1. Treating Company Money as Your Personal Money

One of the biggest misconceptions among company owners is believing that money sitting in their company’s bank account automatically belongs to them.

Your company is a separate legal entity. Using company funds for personal expenses, including mortgage repayments, holidays or personal credit cards, can create unexpected tax consequences.

Understanding Division 7A

Division 7A is designed to prevent private company profits from being distributed to shareholders or their associates through certain payments, loans or debt forgiveness without appropriate tax treatment.

For example, regularly transferring money from your company into your personal account could eventually create a substantial shareholder loan.

Depending on the circumstances, that loan may need to be repaid, placed under a complying Division 7A loan agreement or addressed through another legitimate arrangement.

Failure to comply could result in the amount being treated as an unfranked dividend, potentially creating a significant personal tax liability.

How to Avoid Division 7A Problems

Before withdrawing company funds, establish whether the payment represents:

• Salary or wages.
• A properly declared dividend.
• A complying company loan.
• Repayment of money the company already owes you.

Don’t wait until the end of the financial year for your accountant to discover the problem. Establish a clear payment strategy before taking money out.

2. Paying Employee Superannuation Late

Superannuation isn’t an optional business expense or a temporary solution to cash flow problems.

With Payday Super commencing from 1 July 2026, employers must ensure superannuation contributions reach employees’ nominated funds within the applicable timeframe, generally seven business days after payday, subject to specific exceptions.

Failing to meet superannuation obligations can trigger the Superannuation Guarantee Charge (SGC), additional costs, penalties and compliance requirements.

Unpaid superannuation may also expose company directors to personal liability under the Director Penalty Notice regime.

How to Prevent Late Super Payments

The solution starts with incorporating superannuation into your regular payroll and cash flow management.

Business owners should:

• Budget for wages and superannuation together.
• Monitor payroll and contribution deadlines.
• Maintain sufficient working capital.
• Improve debtor collection and review operating expenses.
• Address cash flow shortages before super becomes overdue.

If your business consistently relies on delaying employee superannuation to cover other expenses, the underlying problem is likely your cash flow management.

3. Buying a Company Car Without Considering FBT

Purchasing a vehicle through your company might appear to be an attractive tax strategy.

However, claiming business expenses or eligible GST credits doesn’t automatically mean the arrangement is tax-effective.

A company-owned vehicle available for an employee’s or director’s private use can create a Fringe Benefits Tax (FBT) liability.

Importantly, a vehicle garaged at your home is generally considered available for private use, even when predominantly used for business purposes.

Depending on the vehicle’s value and circumstances, annual FBT costs can reach thousands of dollars.

What Should You Consider Before Buying a Company Car?

Before purchasing a vehicle through your company, discuss the following with your accountant:

• Potential GST and income tax deductions.
• Expected private versus business usage.
• FBT calculations and available exemptions.
• Logbook requirements and the operating cost method.
• Whether eligible commercial vehicle or electric vehicle concessions apply.
• Whether personal ownership would produce a better overall outcome.

Certain eligible electric vehicles may qualify for FBT exemptions, while some commercial vehicles receive concessional treatment where private use is sufficiently limited.

The key is calculating the total tax implications before purchasing the vehicle, rather than discovering an unexpected FBT liability months later.

4. Ignoring ATO Lodgements Because You Cannot Pay

Another dangerous assumption is believing that company debts can never become personal liabilities.

Under Australia’s Director Penalty Notice (DPN) regime, company directors can become personally liable for certain unpaid obligations, including PAYG withholding, GST and superannuation guarantee liabilities.

Failing to lodge required statements within relevant timeframes can make matters worse.

For certain overdue liabilities, directors may face what’s commonly known as a lockdown director penalty, limiting the options otherwise available to remit that penalty.

Why Lodging Your BAS on Time Matters

One of Jacob’s most important recommendations is straightforward:

Lodge on time, even if your company cannot immediately pay.

Lodging and paying are separate obligations.

If your company owes the ATO money but doesn’t have sufficient funds, delaying lodgement won’t eliminate the debt. It may instead increase your financial and personal exposure.

Keep your BAS and other reporting obligations current, understand your outstanding liabilities and engage with your accountant early to explore appropriate solutions.

5. Leaving Company Tax Planning Until After 30 June

Perhaps one of the most expensive mistakes is waiting until the financial year has ended before discussing tax planning.

Once 30 June passes, many legitimate opportunities to manage your company’s tax position may no longer be available for that financial year.

Effective tax planning means understanding your financial position while there’s still time to make informed decisions.

What Should Company Tax Planning Include?

Before the end of the financial year, review:

• Expected company profit and estimated tax liabilities.
• Appropriate salary, dividend and superannuation arrangements.
• Outstanding Division 7A loans.
• Legitimate planned business expenses and investments.
• PAYG instalments and upcoming tax obligations.
• Personal cash requirements and available company funds.

Remember, accounting profit doesn’t necessarily equal available cash.

Your company might report $100,000 in profit while much of that money remains tied up in unpaid invoices, stock, equipment or loan repayments.

Without proper planning, you could face a substantial tax bill without having enough cash available to pay it.

Proactive tax planning helps prevent these situations and allows business owners to make better financial decisions throughout the year.

Frequently Asked Questions About Company Tax Mistakes

Can I Transfer Money From My Company to My Personal Account?

Yes, but the transaction must be correctly classified and documented. Depending on the circumstances, it may represent salary, a dividend, a loan or repayment of money owed to you. Division 7A may apply to certain payments and loans.

Can Directors Be Personally Liable for Company Tax Debts?

Yes. Under the Director Penalty Notice regime, directors can become personally liable for certain unpaid company obligations, including PAYG withholding, GST and superannuation guarantee liabilities.

Is Buying a Car Through My Company Tax-Deductible?

Potentially, but deductions and GST credits depend on the circumstances. Private use may also create FBT obligations, so the overall tax position should be assessed before purchasing.

When Should Company Tax Planning Begin?

Tax planning should occur throughout the financial year, with a comprehensive review before 30 June. This provides time to assess legitimate strategies before the year ends.

Avoid Costly Company Tax Mistakes With Latitude Accountants

Having a company structure is only one part of running a financially successful business. Understanding your obligations, managing cash flow and making informed tax decisions are equally important.

At Latitude Accountants, our experienced team helps Australian business owners navigate company tax obligations, improve financial management and plan proactively.

Don’t wait until a costly mistake appears in your next tax return.

Book a Free Business Discovery Call today.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton | Adelaide
📞 1300 706 597
📧 info@latitudeaccountants.com.au.

Disclaimer

This content is general information only and does not constitute financial, tax, accounting, legal, property or business advice. Tax laws and individual circumstances vary. Speak with a qualified adviser about your specific situation before making financial or business decisions.