Small business owners need to remember that a company owned by them, is not for their unrestricted personal use.

In a recent case, the Administrative Appeals Tribunal held that a taxpayer, who was a director and shareholder in a private company, was liable to the deemed dividends provision for monies deposited in her bank account. The payments were debts due to the company. The company had directed its debtors to pay the money owed into the taxpayer’s account.

Broadly, the deemed dividend provisions treat certain payments, loans and debt forgiveness by a private company to its shareholders (or their associates) to be assessable income in the form of unfranked dividends.

A private company should ensure that all payments are deposited to its own bank account.