what would you do with 200k cash lotto winning?

[Terry_w]

That's what I thought. While the ATO might 'see through' a company structure in determining tax, the ability of creditors, people suing etc is far more limited.

Generally, if China operated under a company structure and was paid wages or directors fees or dividends etc then these could generally be safe from creditors, people suing etc. The biggest exception being trading while insolvent.

So simplistically lets asume China has been doing consulting under a company structure successfully for a number of years and had been transferring the profits (via wage/dividends/directors fees etc) to his personal name. He stuffs up (working under his company China P/L) - the complainant will sue China P/L and wind the company up if necessary taking all the assets of China P/L. But his Mosman home, twelve IPs and learjet all held in his name are off limits?

Is this broadly and generally correct?

Hi Ed,

There are a few ways to get sued. Say China was a surgeon and amputated the wrong leg this is negligance and the amputee would probably sue the hospital and the surgeon. The company may not help much in this regard because China performed the work. But it could still help perhaps. A court may award damages against all 3 equally - eg 1/3 each.

Another way of being sued in business over a contractual issue. Say a Dr China had to purchase leg saws regularly and China Pty Ltd entered into a contract with Legless Pty Ltd to supply, something happened and China P/L couldn't pay a bill. Legless would sue China P/L.

Because a company has a max of 30% tax rate it is common for money to be left in a company rather than distributed to a individual who may may 47% tax. So if China operated under a company and attributed all the income to himself for tax reason, but left a large chunk of it in the company to earn interest in a bank account this interest would be attributable to the company in the next tax year. If China got sued for defamation for example, the company assets would be safe in general. But because this was his/her money there could be a claim on that money in the short term. The longer it is in the company the stronger the asset protection will be.

But, if China owns the shares in the company then creditors can get their hands on these and thereby get at the company assets.

 

[Peter 14.7]

Hi Ed,

There are a few ways to get sued. Say China was a surgeon and amputated the wrong leg this is negligance and the amputee would probably sue the hospital and the surgeon. The company may not help much in this regard because China performed the work. But it could still help perhaps. A court may award damages against all 3 equally - eg 1/3 each.

Another way of being sued in business over a contractual issue. Say a Dr China had to purchase leg saws regularly and China Pty Ltd entered into a contract with Legless Pty Ltd to supply, something happened and China P/L couldn't pay a bill. Legless would sue China P/L.

Because a company has a max of 30% tax rate it is common for money to be left in a company rather than distributed to a individual who may may 47% tax. So if China operated under a company and attributed all the income to himself for tax reason, but left a large chunk of it in the company to earn interest in a bank account this interest would be attributable to the company in the next tax year. If China got sued for defamation for example, the company assets would be safe in general. But because this was his/her money there could be a claim on that money in the short term. The longer it is in the company the stronger the asset protection will be.

But, if China owns the shares in the company then creditors can get their hands on these and thereby get at the company assets.

Excellent stuff Terry, Peter

 

[Ed Barton]

Hi Ed,

There are a few ways to get sued. Say China was a surgeon and amputated the wrong leg this is negligance and the amputee would probably sue the hospital and the surgeon. The company may not help much in this regard because China performed the work. But it could still help perhaps. A court may award damages against all 3 equally - eg 1/3 each.

Another way of being sued in business over a contractual issue. Say a Dr China had to purchase leg saws regularly and China Pty Ltd entered into a contract with Legless Pty Ltd to supply, something happened and China P/L couldn't pay a bill. Legless would sue China P/L.

Because a company has a max of 30% tax rate it is common for money to be left in a company rather than distributed to a individual who may may 47% tax. So if China operated under a company and attributed all the income to himself for tax reason, but left a large chunk of it in the company to earn interest in a bank account this interest would be attributable to the company in the next tax year. If China got sued for defamation for example, the company assets would be safe in general. But because this was his/her money there could be a claim on that money in the short term. The longer it is in the company the stronger the asset protection will be.

But, if China owns the shares in the company then creditors can get their hands on these and thereby get at the company assets.

Let's not confuse eye surgery with leg surgery. It could erupt into a ten page thread about which is more profitable.

I think China should start paying good money for good advice, rather than relying on the kiosk in the shopping centre around tax time.

 

[atti]

Agree. Lock it away mentally and then think.

Having cash at call is a very big tool to low ball with when the time is right.

Peter

that sure gives flexibility but i think housing prices is overvalued in australia by 20-35% but problem is i dont think its going to drop significately if it does drop it will be very much 5% max... or a slow bleed 1-5% per year next 7 years.

what does everyone thinkabout australian house prices for next few years ?

theres lots of options for me atm which is confusing crap outa me head. especially units atm which according to my calculations gives a 5-8 % return on my investments. location and scarcity is there but uncertain economic out look and govtments is scaring me .

 

[china]

Hi Ed,

There are a few ways to get sued. Say China was a surgeon and amputated the wrong leg this is negligance and the amputee would probably sue the hospital and the surgeon. The company may not help much in this regard because China performed the work. But it could still help perhaps. A court may award damages against all 3 equally - eg 1/3 each.



Because a company has a max of 30% tax rate it is common for money to be left in a company rather than distributed to a individual who may may 47% tax. So if China operated under a company and attributed all the income to himself for tax reason, but left a large chunk of it in the company to earn interest in a bank account this interest would be attributable to the company in the next tax year. If China got sued for defamation for example, the company assets would be safe in general. But because this was his/her money there could be a claim on that money in the short term. The longer it is in the company the stronger the asset protection will be.

But, if China owns the shares in the company then creditors can get their hands on these and thereby get at the company assets.

The company will not be responsible for one third of litigation for professional negligence - not if the company consists of only one person. Different if the company consists of many doctors such as some of the larger general practice chains such as primary health care, symbion, etc. For doctors to practise in Australia, it is now a requirement that they all carry current professional indemnity as a condition of medical registration and hence all litigation for professional negligence is covered by the practitioner's insurance.

My accountant has been telling me that whatever structure I am in be it company or sole trader, I would have to pay 47% tax. Simply because all income generated is personal services income generated by a single person, i.e. me and therefore, having a company structure does not fool the ATO.

I have been advised that the only way to start paying 30% tax is to have another person in the company generating income. Using your example, there would need to be a doctor 2 within the company.

 

[Terry_w]

The company will not be responsible for one third of litigation for professional negligence - not if the company consists of only one person. Different if the company consists of many doctors such as some of the larger general practice chains such as primary health care, symbion, etc. For doctors to practise in Australia, it is now a requirement that they all carry current professional indemnity as a condition of medical registration and hence all litigation for professional negligence is covered by the practitioner's insurance.

My accountant has been telling me that whatever structure I am in be it company or sole trader, I would have to pay 47% tax. Simply because all income generated is personal services income generated by a single person, i.e. me and therefore, having a company structure does not fool the ATO.

I have been advised that the only way to start paying 30% tax is to have another person in the company generating income. Using your example, there would need to be a doctor 2 within the company.

I would tend to agree with this.

But what about protecting wealth built up. if you are investing then have you considered a discretionary trust to own assets?

 

[atti]

Hey if i wanted to give someone eg. wifes, family, relatives.

is there a cap on giving per person per financial year ? i read somewhere max a person can received private money is 14k per financial year before tax department start looking into money further right ? looks like my father is on centerlink he will get in trouble recieving this if it was wired . what about the wife if i wired into her account does she have to declare the cash say 50k

damn winning the cash stressing out how to use it... lmao

 

[Terry_w]

Hey if i wanted to give someone eg. wifes, family, relatives.

is there a cap on giving per person per financial year ? i read somewhere max a person can received private money is 14k per financial year before tax department start looking into money further right ? looks like my father is on centerlink he will get in trouble recieving this if it was wired . what about the wife if i wired into her account does she have to declare the cash say 50k

damn winning the cash stressing out how to use it... lmao

There are some strange rumours out there aren't there!

There are no laws restricting gifting or receiving money. There is no tax on gifts, as long as they are real gifts.

Social security is a different matter as there are various rules under social security act. Receiving more than a certain amount will reduce social security payments. Gifting certain amounts or more may also affect social security payments (via the assets test etc) as the giftor will be considered to still have the gift for up to 5 years

 

[sanj]

Hey if i wanted to give someone eg. wifes, family, relatives.

is there a cap on giving per person per financial year ? i read somewhere max a person can received private money is 14k per financial year before tax department start looking into money further right ? looks like my father is on centerlink he will get in trouble recieving this if it was wired . what about the wife if i wired into her account does she have to declare the cash say 50k

damn winning the cash stressing out how to use it... lmao

you are allowed to gift any amount of money but i cant comment on how it affects centrelink repayments

oops - terry said it better