Company Profits
- Thread starter bicko
- Start date
Thanks for that ACDC,
yep reinvesting got that
moving to another company yep
now franked dividends?
does that mean because youve already payed tax at 30%, that dividends payed to the share holders is tax free up to 30%?
any takers
My angle is, if youve got a successful company, how do you go about enjoying the finer things in life, utilizing the profits from the company.
I know you pay yourself a wage, but we only want to really do that up to 56,000 each or where ever the top of the new 30% personal tax bracket is.
I know this is digressing a bit from property, but Im sure that these are questions that would be asked by any property investor/developer wanting to make a full time living off of it.
yep reinvesting got that
moving to another company yep
now franked dividends?
does that mean because youve already payed tax at 30%, that dividends payed to the share holders is tax free up to 30%?
any takers
My angle is, if youve got a successful company, how do you go about enjoying the finer things in life, utilizing the profits from the company.
I know you pay yourself a wage, but we only want to really do that up to 56,000 each or where ever the top of the new 30% personal tax bracket is.
I know this is digressing a bit from property, but Im sure that these are questions that would be asked by any property investor/developer wanting to make a full time living off of it.
Dale in his "Trust Magic" book has a lot of ideas for the trust to spend money tax effectively in ways the indicidual might not- some of those ideas may be applicable to a company.
Maybe the company needs to but the odd gift for its directors. Perhaps the directors need to do a little research interstate. And of course you have an important meeting with a client next week- you have to have a new suit to impress the client.
However, if you have plans to sell the company, too many deductions of this sort will show on the bottom line of the company, and this will affect the sale price.
Maybe the company needs to but the odd gift for its directors. Perhaps the directors need to do a little research interstate. And of course you have an important meeting with a client next week- you have to have a new suit to impress the client.
However, if you have plans to sell the company, too many deductions of this sort will show on the bottom line of the company, and this will affect the sale price.
In my understanding, the company pays tax up to the highest marginal rate on behalf of the shareholder. The shareholder can then claim back any excess taxes paid.bicko said:
Bicko,
Paying tax is not the end of the world.
Directors' loans (which are then forgiven) is one approach used by more dodgy business owners (including a number of large companies).
Cheers,
Aceyducey
could you gift the money to a trust ? so you already payed 30% tax on it .. then the trust could invest/spend it for you ?
I would consult with both accountants & lawyers before taking this step.Nicholas H said:
My feeling is that it would be seen as highly illegal!
Works better if the business is owned by the Trust...in which case the profits can be paid legitimitely via dividends to the Trust.
Cheers,
Aceyducey
geoffw said:
For the gifts etc I would think fringe benefits tax would kick in, unless it was a laptop or other work related stuff like the research interstate. I don't think the suit would work either, unless staff were forced to wear furry blue suits as a uniform, then it might be allowable.
As far as dividends go the company pays co tax at 30%, you are liable to personal tax on the dividend, but you get a rebate (franking credit) for the company tax paid, so effectively if you are over the 30% tax bracket the divdend is taxed at your personal rate (eg company might pay 30% and you another 12%). If you are under 30% I'm fairly sure the effect of the credit is that it can reduce tax payable on other income.
Aceyducey said:
if the trust was owned the business .. and you gave profits to the trust .. the trust would have to distribute the profits ? since it was income to the trust? you would then take it at your tax rate and gift it back to the trust ..
if you want to give money to a trust from a company for the trust to actually hold and invest, you would always have to go through a person ?
paul_s said:I don't think the suit would work either, unless staff were forced to wear furry blue suits as a uniform, then it might be allowable.
As far as my knowledge of clothing and what is deductible is concerned I am under the belief that you can claim almost anything as a deduction. Suits, ties, shirts, pants, skirts etc can be a Uniform required for the job. The only catch is it should be embroidered or screenprinted with your logo or similar. That way it is clothing specific for the job. The embroidery can be of a similar colour and very discreet. Similar with casual clothing as it can come under advertising. Just check most promotional product suppliers catologues for ideas.
Also, along the lines of promotional products (the better suppliers have many items to choose from including many corporate type gifts), you can usually purchase items without print, so if, for instance, you had a number of people you wanted to give presents to, you could organise watches, corporate style pens, crockery etc. Again this would go into your expenses as advertising.
There will be many more things, just use some creative thinking.
Bye the way I am not an Accountant, so this is not advice. Double check anything with your own Accountant before you act.
Cheers
Hi
There are a number of ways that this could happen.
Ideally, the shares in the company could be owned by the discretionary trust which would mean that dividends could be paid from the company to the trust and the trust could then distribute those dividends along with the tax credits to the individuals who will benefit most from the position.
Small gifts of less than $100 per time and per person will not trigger FBT issues so long as they are given infrequently.
I have previously posted a list of unusual and potential tax deductions on this forum which might give you a few ideas of how to get the funds from the company in a nice tax free manner.
However, I second the thoughts of keeping the primary aim in mind. There is no point claiming lots of expenses if we bleed the company dry, and, make it harder to sell for a good value in times to come.
Dale
There are a number of ways that this could happen.
Ideally, the shares in the company could be owned by the discretionary trust which would mean that dividends could be paid from the company to the trust and the trust could then distribute those dividends along with the tax credits to the individuals who will benefit most from the position.
Small gifts of less than $100 per time and per person will not trigger FBT issues so long as they are given infrequently.
I have previously posted a list of unusual and potential tax deductions on this forum which might give you a few ideas of how to get the funds from the company in a nice tax free manner.
However, I second the thoughts of keeping the primary aim in mind. There is no point claiming lots of expenses if we bleed the company dry, and, make it harder to sell for a good value in times to come.
Dale
Dale,
Thanks for the info.
I see a problem for myself in that I personally own the company shares and it currently has a significant amount of cash (a few 100K after company tax). I am hoping to find a way to have all that money available for the trust to invest without first having to pay more tax on it (my accountant is currently looking at all this).
Seems like I ideally want to have the company shares owned by the trust and that money lent to the trust directly from the company. But perhaps that's not possible without paying more tax first. While I could save some tax by distributing to other than myself, it seems distributing the whole lot would still involve a significant tax hit.
Makes investing from the company structure look tempting despite all the other reasons trusts are better.
I feel like the taxman has me tied to a chair in a back room and I'm desparately struggling to free myself...
GP
Thanks for the info.
I see a problem for myself in that I personally own the company shares and it currently has a significant amount of cash (a few 100K after company tax). I am hoping to find a way to have all that money available for the trust to invest without first having to pay more tax on it (my accountant is currently looking at all this).
Seems like I ideally want to have the company shares owned by the trust and that money lent to the trust directly from the company. But perhaps that's not possible without paying more tax first. While I could save some tax by distributing to other than myself, it seems distributing the whole lot would still involve a significant tax hit.
Makes investing from the company structure look tempting despite all the other reasons trusts are better.
I feel like the taxman has me tied to a chair in a back room and I'm desparately struggling to free myself...
GP
Hi Dale,
When buying gifts for family members for b'days, xmas and such does this amount also need to stay under $100? Paying for dinner for two these days would not be covered by this amount.
Also if I have a relative who is not a named beneficiary of the trust but is one by blood. Can I pay travel expenses for that person who is going to another state to renovate my property?
When buying gifts for family members for b'days, xmas and such does this amount also need to stay under $100? Paying for dinner for two these days would not be covered by this amount.
Also if I have a relative who is not a named beneficiary of the trust but is one by blood. Can I pay travel expenses for that person who is going to another state to renovate my property?
You can actually transfer some ownership across to a trust. The Value shifting provisions is what Dale is referring to, however providing the value shift is less than $150K then the transaction is exempt from CGT.
eg Coy is worth $1,000,000 (ie net assets)
Shares on issue = 100 (each share is worth $10,000)
You can issue 17 new shares to a related party at no cost without triggering CGT
now 117 shares worth $8547 each. the original 100 shares x 8547 = $854,700
Every little bit counts !
Rather than use your company as an investment holding vehicle, i have used a strategy before where the company buys income units in a HDT. This means that the company will help fund a purchase but the cap gain can go elsewhere and does not get trapped in a company.
hope this is useful
Nick M
eg Coy is worth $1,000,000 (ie net assets)
Shares on issue = 100 (each share is worth $10,000)
You can issue 17 new shares to a related party at no cost without triggering CGT
now 117 shares worth $8547 each. the original 100 shares x 8547 = $854,700
Every little bit counts !
Rather than use your company as an investment holding vehicle, i have used a strategy before where the company buys income units in a HDT. This means that the company will help fund a purchase but the cap gain can go elsewhere and does not get trapped in a company.
hope this is useful
Nick M
Nick,
Thanks a lot for the info.
I've never heard of value shifting provisions, but I'll ask my accountant about it.
GP
Thanks a lot for the info.
I've never heard of value shifting provisions, but I'll ask my accountant about it.
So you're saying that although the company has bought units, you could still distribute income or capital gain elsewhere (effectively using the unit and discretionary aspects of the trust at the same time)?
GP
