And what is the extra tax paid by the recipient ?? Up to 28%... Hence a final rate of 58% or more....I wont do the maths. Maximum tax rate is MUCH higher than 60%.
A bucket company approach generally = more tax. Its the dumbo scheme for dumbo accountants to suggests to even dumber clients. Or its Part IVA.....
Ever applied for a private ruling on a bucket company scheme ?? Nobody has successfully.
I understand where you coming from and as a general rule you are correct.
Truth is 90% of accountants cant comprehend themselves the complexity of Div7A and all the pitfalls of it haha..
You are correct in the sense that it is senseless to distribute to a bucked to save a few cents now and cause Div 7A issues etc for the next 7 years.
But when you have clients maxing out at $180K at the individual level, losses in all other structures utilised then a bucket company option is a smart approach.
By this I mean (and im sure you are aware) that funds have to be paid at the end of the term (7 years) so it comes down to a strong business/property wealth creation strategy whereby funds can be utilised (cash) at the end of this term to physically pay the loan/div 7a balance.
Most accountants get stuck even prior to this, but past this point there needs to be an additional strategy in place to then put the cash funds to use etc.
I get clients asking me to use their bucket company the last accounting firm set up for them but in 90% of cases I am against it the client is not large enough to justify the increase in acc work, fees and complexity as you are creating a nightmare if not managed properly with a defined exit strategy for it.
Gone are the days of "throw it to the bucket company" trick..