Is this legal?

Hi first time poster to this forum, but long time looker :)

We've purchased an IP in our family trust, which was setup by our accountant early this year. It is positive geared, about $3,000. Our accountant has told us that we can easily not pay tax on it this year by paying a Director Fee? I queried him on this and how it worked and he said that it means we can just not pay tax this year and bring it in a later year when our taxable income is not so high. Has anyone else heard of this and is it legal?

thanks Mick
 
Our accountant has told us that we can easily not pay tax on it this year by paying a Director Fee?
If you're being paid a director's fee, doesn't that just add on to your personal taxable income? :confused: Is that what you're confused about, too?

Maybe the Trust can physically pay you a director's fee in 09/10 for work done in 08/09, and claim it against 08/09 income? (ie the Trust claims tax on an accrual basis, rather than cash basis.) That way, Trust's expense is in 08/09 tax year, but it's not counted as your personal income until 09/10. (Because personal ITRs are usually done on a cash basis.)

I don't know about this particular example, but I do know that some entities pay cash on accrual basis and others on cash basis, so transferring tax debt between different years is possible.

PS Nice to see you posting rather than lurking! ;) Welcome. :D
 
So you set up a trust, a trustee company and you have no clue what the hell they're there for or how they work?
Did you read anything you signed?
Did you read the "articles of association" of your company?
Did you read your company's constitution?
Did you read about the obligations and responsibilities of a company director?

Don't worry, it seems most don't either.
 
A trust does not have a director, it has beneficiaries - I can't see how your scenario is possible. It seems like another case of a client not understanding the structure they have been setup in - this is very common.

If you were positively geared $3k and you had a minor beneficiary (a child under 18 and not under a legal disability) a simple distribution to that minor would clear off any tax payable. Minors can receive $3k in the current financial year and not pay any tax due to increase in Low income tax offset.
 
PistonBroke

Companies no longer have a memorandum and articles of association since the changes to the Corporations Act 2001. Basically companies can either have "replacable rules" or a single "constitution" Under the Act any companies which had a memorandum or articles of association automatically had these as there constitution. So reading a company constitution is now applicable.

Particularly if it is a new company setup then there will be no memorandum or articles of association so would be nothing for them to have read.
 
Your right coasty, but I dunno when it was setup.
It just seems strange to me that so many people don't take the time to read the basics, nor what they sign.

And yes it's legal, there is nothing wrong with paying directors fees.
Of course it's taxable income for the receiver though.
 
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