Results 1 to 7 of 7

Thread: Shareholder/Director Salary not paid but owed.

  1. #1
    Email problem
    Join Date
    Jun 2016
    Location
    Somerset West
    Posts
    3
    Thanks
    5
    Thanked 0 Times in 0 Posts

    Question Shareholder/Director Salary not paid but owed.

    If a Director/Shareholder decide not to take his/her salary for a period of time but still performs his/her duties during that period and let the Company owe the money to him/her; how do you correctly put this in the books? The time sheet submitted state the hours worked, but he/she does not claim it. What is the tax implications on the money that the Company owe to him/her? Do you put it against a loan account or does it form part of his/her Share Capital?

  2. #2
    Full Member EAB's Avatar
    Join Date
    Jun 2016
    Location
    Roodepoort
    Posts
    88
    Thanks
    0
    Thanked 13 Times in 12 Posts
    Hi Meganika,

    The salary needs to be put against the loan account and not share capital

  3. Thanks given for this post:

    Meganika (30-Jun-16)

  4. #3
    Email problem
    Join Date
    Jun 2016
    Location
    Somerset West
    Posts
    3
    Thanks
    5
    Thanked 0 Times in 0 Posts
    Hi Werner_E, thank you for your input, much appreciated. Do you know if there are any tax implications while in the loan account?

  5. #4
    Silver Member
    Join Date
    Sep 2012
    Location
    Louis Trichardt
    Posts
    334
    Thanks
    58
    Thanked 43 Times in 39 Posts
    Yes, it is still taxable.

  6. Thanks given for this post:

    Meganika (05-Jul-16)

  7. #5
    Full Member EAB's Avatar
    Join Date
    Jun 2016
    Location
    Roodepoort
    Posts
    88
    Thanks
    0
    Thanked 13 Times in 12 Posts
    It should be taxed before it goes to the loan account.

    Normally you would pay out the net salary to an employee, Credit Bank and debit the Salary Control account. In this case the only leg that is missing is the Bank. Thus you will debit the Salary Control account and credit the Director's Loan account with the net salary.

    So the balance in the Director loan account is an after tax amount.

  8. Thank given for this post:

    Dave A (01-Jul-16), Meganika (05-Jul-16)

  9. #6
    Moderator IanF's Avatar
    Join Date
    Dec 2007
    Location
    Jhb
    Posts
    2,679
    Thanks
    197
    Thanked 529 Times in 405 Posts
    I would suggest run this as a memo account (not in the books) then you keep a record of salary owed in that account and only process it when the business is making a profit and can deduct the expense.
    Only stress when you can change the outcome!

  10. Thanks given for this post:

    Meganika (05-Jul-16)

  11. #7
    Full Member EAB's Avatar
    Join Date
    Jun 2016
    Location
    Roodepoort
    Posts
    88
    Thanks
    0
    Thanked 13 Times in 12 Posts
    The memo account might work. Just keep the following in mind:

    1. You are not accounting for the expense in the period when in was incurred
    2. Personal income tax. Calculations needs to be done on how it will affect the individual income tax - accounting for a couple of "small" monthly amounts vs one "big" amount. Remember that as per SARS an individual must declare income received/accrued to him in that specific period. In this case the income is due to the director, thus accrued in that financial period.
    3. Even if the salary is causing the company to create a loss that loss can be carried forward to when there is a profit, so you will not lose the expense for the company
    4. Additional admin work. If you credit the loan account, it is over and done with, what is in the books are owed to the director. If you keep a memo account you need to keep that one up to date as well.
    5. This ties in with point 2. Should you be unlucky and SARS wants to do an audit of the company and they need supporting documents for the suddenly high director salary, they might argue that the expense is not for the current year and do reassessments. Rather safe than sorry

  12. Thanks given for this post:

    Meganika (05-Jul-16)

Similar Threads

  1. Salary not paid
    By tracyvanstaden04 in forum Labour Relations and Legislation Forum
    Replies: 3
    Last Post: 28-Sep-15, 12:58 PM
  2. [Question] Employer has not paid my final salary (Nov2011) & annual leave
    By robbiwood in forum Labour Relations and Legislation Forum
    Replies: 10
    Last Post: 09-May-13, 08:06 AM
  3. Payment owed to me ( again )
    By Perform Computers in forum General Business Forum
    Replies: 7
    Last Post: 19-Jul-11, 10:29 AM
  4. Recourse for salary not paid by employer?
    By Camille in forum Labour Relations and Legislation Forum
    Replies: 14
    Last Post: 08-Feb-11, 09:45 PM
  5. Unpaid Salary : Co Act, Kings Commision, Director Liability? any insight?
    By wesselskathy in forum Labour Relations and Legislation Forum
    Replies: 10
    Last Post: 21-Nov-10, 11:11 PM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •