I’m currently a federal government IT contractor doing PAYG contract, and thus paying individual tax rate. I have just

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Customer: I’m currently a federal government IT contractor doing PAYG contract, and thus paying individual tax rate. I have just created a Pty Ltd company. But need to know what will be the structure i.e. Director/Shareholder and tax obligations if I do contracting through my own company?
JA: Have you talked to a financial professional about this?
Customer: A bit
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: I hold Australian Government security clearance
Answered by John Melis in 10 mins 11 months ago
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John Melis
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John Melis, Expert

Hello, I’m John Melis, a solicitor in Australia, and I’ll be helping you with your question today. 

When you set up your company, you will be a director and a shareholder. The company will then have a contract with the government. Then you will pay tax at the company rate. It’s a flat base tax rate. On the ATO website they have all details about the tax rates so you can review them. The company structure can be set up very quickly. You can use clear docs as the company to set it up.

Customer
Hi John, do I need a business account to pay myself a salary as the Director of the company?
For example, currently as PAYG contractor I get paid let’s say $150k a year but how will this work with a Pty Ltd company?
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John Melis, Expert

Thank you for your follow-up. You will need to set up a company account. And then you can pay yourself out of the company a director fees.

Customer
Ok, is it based on whatever I want or is there any recommendation?
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John Melis, Expert

You can decide what directors fee that you pay. It can be $5000 you can be $100,000 it just depends on how much money you got in the company.

Customer
Is it a one-off fee or I can pay myself like monthly salary?
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John Melis, Expert

You can pay out what level you want to pay from the company. You are director and you make the choice.
Customer
Is having governemnt security clearance going to create conflict of interest for any reason?
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John Melis, Expert

As long as you disclose the interest to the government and they confirm in writing they have no issue, and you have no problem.

Customer
ok, thanks
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John Melis, Expert

Enjoy the rest of your day.
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