Mark Bouris answers readers questions, including advice on starting an online business.
I AM studying a diploma of commercial arts interior design and considering registering my business name and setting up an online interiors store. Is it easy enough to build a website, buy wholesale and sell online for a profit? Or am I biting off more than I can chew here? The plan is to eventually combine the two - interiors online and an interior design service.
I think it would be a good idea to get some experience before you jump into your own business. Retail is a tough industry right now and there are a lot of people struggling, so you need to make sure you have a niche and can set yourself apart. You might want to consider getting a job and setting up your online store as a part-time gig. The last thing you want to do is put all your money into a business with no real experience. Find a job that will teach you the basic skills you need to establish your own business and go from there. Setting up an online business isn't as easy as it looks and there are also a lot of failures. Good luck.
I AM a single, self-employed 45-year-old private business consultant working from my home office. My practice generates $250,000 to $300,000 per year. I am paying off my house and I have a mortgage of $450,000. My aim is to pay this off as soon as possible. To do this I need to withdraw substantial income from my business, resulting in substantial amounts of personal income tax. I do not claim a full-time home office because I am concerned about paying capital gains tax on a proportion of the selling price when I eventually sell. What is the best way to minimise income tax and pay off my loan as quickly as possible? I have been told there would be complexities in borrowing substantial amounts from my company to pay the mortgage.
On the facts you've given I'd say you're best not to borrow from the company, but rather to take your remuneration and make debt reductions from there. You have a good income, so even after the payment of your income taxes you still have the ability to reduce your debt quickly. Do you have an offset account where you park surplus income? If you don't, you should. Also, are you making monthly, fortnightly or weekly loan repayments? More frequent repayments will reduce your mortgage much faster. Regarding the home office, if you claim occupancy costs such as interest and rates, you do open it up to capital gains tax. You can, however, claim operational costs such as phone, internet, power, heating and cooling, as well as depreciation on office equipment and furniture. You will need to keep a journal of time spent in the home office. The rule is to keep good records to ensure that you are getting a deduction for all of your legitimate business expenses.
Mark Bouris is executive chairman of Yellow Brick Road, a wealth management company and small business adviser offering products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax: ybr.com.au.
If you have a question for Mark Bouris, email it to Max Mason at
max.mason@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Is it easy to build a website, buy wholesale and sell online for a profit?
Not necessarily. Setting up an online store can look simple, but retail is tough right now and there are many failures. You need a clear niche, a way to differentiate your products or service, and realistic expectations. Consider starting part‑time and gaining experience before committing all your money.
Should I get experience before launching my own online interiors business?
Yes. The article advises getting hands‑on experience first — for example, take a job that teaches you the basic skills of retail and interior design. That experience will reduce your risk and help you build a more viable business when you go solo.
Can I combine an online interiors store with an interior design service?
Yes, combining an online shop with a design service is a reasonable long‑term plan. The recommendation is to develop skills and market differentiation first, then scale into the combined model — possibly starting the shop as a part‑time venture while you gain experience.
How can I make my online interiors retail business stand out in a competitive market?
Focus on a specific niche and clearly set yourself apart from competitors. Use the experience you gain to refine your offer, and consider launching part‑time so you can test the market without risking all your capital.
Should I borrow substantial amounts from my company to pay my mortgage?
On the facts given, the article suggests you’re best not to borrow from the company. Borrowing can be complex; a simpler approach is to take remuneration from the business and use that income to reduce debt.
What practical steps can help me minimise income tax and pay off my mortgage faster?
Take a reasonable salary rather than using company loans, use an offset account to park surplus income, and make more frequent loan repayments (weekly or fortnightly) to reduce interest and pay down the mortgage faster. Keep in mind you’ll still pay income tax on your remuneration.
Which home office expenses can I claim without opening up my home to capital gains tax?
You can claim operational costs such as phone, internet, power, heating and cooling, plus depreciation on office equipment and furniture. However, claiming occupancy costs (for example, interest and rates) can expose part of your home to capital gains tax when you sell.
What records do I need to keep for claiming home office deductions?
Keep good records and maintain a journal of the time you spend in the home office. Accurate records help ensure you claim legitimate operational expenses and depreciation correctly.
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