Tax Free Threshold Query

Hi all, i'm hoping you can help me with my situation. I own my own business (currently paying myself approx. $40K) but also have multiple neutrally geared properties under my own name with depreciation (giving me approx $30K of tax deductions). How is it best to manage my tax?

Option 1.
Pay myself additional amounts through my business and put the money back into the business as a personal loan therefore utilising all of the deductions my own name. With this approach, i get to take advantage of the tax $18,200 tax free threshold.

Option 2.
Don't worry about the $18,200 tax free threshold. Run the business at zero profit and keep the tax deductions under my own name?

What do most investors do?

Gaz
 
Through a company. My plan is to also sell properties in the coming years under my own name (each have approx 150K CG). By choosing option 1, i could accumulate my personal loan to the business. If i decide to sell a property, i wouldn't pay myself anything from the business that year, i would just repay my loan :)
 
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I'd be guessing that if you pay yourself the 40k profits the biz makes, your net tax position will be much better.
You got 30k of depreciation there and next to no income to make use of it.
Would not make sense to pay 30% company tax if you can pay almost zero personal tax instead, although you'd have to pay super too.

My opinion only, I'm definitely not a tax expert.
 
I see, so your income is $40k and your taxable income after deductions is $10k so you are basically not using up the tax free threshold.

You could pay yourself another $10k and not pay any tax. But the company could claim this as a deduction. You might be able to fund this by making a loan to the company but you should seek tax advice especially if this will result in a loss for the company as there are various rules about carrying forward losses.
 
Thank you for your opinion Ace.

Let me clarify my position further ;

I have $48,200 of deductions under my own name ($18,200 TFT + 30K of deductions). I can earn/pay myself this much without paying any tax.

I could put $10K back into the business and therefore pay myself say, $50K from my business for the year (run the business at a -$10K cost position).

I would then utilise all $48,200 worth of deductions under my own name. And the business can then pay me back the $10K at a later date (ie. in the financial year that i sell a property).
 
Perfect response Terry, thank you.

Does this situation occur often? I'd imagine the ATO would look out for things like this? I have depreciation reports supporting my case, surely this presents a strong argument? If i can do it, would it be the most tax effective way to go?
 
Hi all, i'm hoping you can help me with my situation. I own my own business (currently paying myself approx. $40K) but also have multiple neutrally geared properties under my own name with depreciation (giving me approx $30K of tax deductions). How is it best to manage my tax?

Option 1.
Pay myself additional amounts through my business and put the money back into the business as a personal loan therefore utilising all of the deductions my own name. With this approach, i get to take advantage of the tax $18,200 tax free threshold.

Option 2.
Don't worry about the $18,200 tax free threshold. Run the business at zero profit and keep the tax deductions under my own name?

What do most investors do?

Gaz

Personal tax advice is really needed. If your Co generates Personal Services Income the strategy is not optional. There could be strategies to run the losses up in your return to cater to the expected CGT gain. Why increase your income excessively if it doesn't save the company any tax ? A bit of tax planning to identify potential tax issues seems appropriate.

I don't get the $18.2K issue. You always get that. However there are cases where it can be influenced in other ways. For example you could choose NOT to claim depreciation and make it a CGT adjustment to get the $18K threshold AND carry fwd a higher CGT cost base. You don't have to just change salary.
 
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