Who here uses a bucket company?
- Thread starter D.T.
- Start date
Who here uses a bucket company for distributing profits to?
Share details please
When, why, how , etc?
I own a discretionary trust account, does that counts as a bucket company?
It serves the same purpose of distributing profits
Who here uses a bucket company for distributing profits to?
Share details please
When, why, how , etc?
I reckon most peeps don't understand bucketco's and the modern risks, issues and costs. They see it as something someone recommended years ago and have repeated it thereafter. In its simplest form a bucketco can defer taxing for a year. The PAYG instalments then catch up.
I believe lonewolf and YMan are both examples.
Agree with that.
So what do you do when it was set up by your old accountant, or if you are already in this situation, can you turn back the clock, turn back the time?
Also, what if the trust still exists, the business it was engaged no longer exists, so no longer pays PAYG installments? Large tax was paid at 30%, and now the shareholders don't have much income so they use the franking credits??? Wouldn't the same principle apply to shares and their franking credits, so basically if the circumstances of the individuals changed there may be some benefit there? I think the problem there is with generalization that all people's circumstances are similar, when they may not be?
Haven't you got a bathroom to clean or a kitchen to cook in?
pinkboy
Haven't you got a bathroom to clean or a kitchen to cook in?
pinkboy
Haven't you got some chutes to tile?
Who here uses a bucket company for distributing profits to?
Share details please
When, why, how , etc?
Yes.
When this year
Why - to defer or reduce amount paid to beneficieries to even out incomes over 2 years
How - main trust pays some to beneficiaries, remainder to bucket for income for tax year after
I hope I have explained it correctly. I am not an accountant and it's new. It has other purposes which I won't go into but it is a bucket for 2 trusts.
What accountant do you use?
We have a pty ltd company owned by a trust - so we can go either two ways...
1) - declare dividends and pay all profits of the company to the trust and then distribute the maximum (up to 30%) to each beneficiary - then any extra - distribute to the bucket company (have not had to do this yet - but may have to in the future)
2) - declare and pay just enough dividends to the trust so that it can distribute the maximum to the beneficiaries and leave the excess in the company to distribute at a later date... no bucket company needed
the problem with option 2 is the liability - leaving funds in the trading entity that you can be sued for.... if you do something wrong like not carrying enough public liability - workers comp - tax office penalties etc... its better to move it into the bucket company so that creditors cannot get access to it....
depends on how much money you are talking about as to whether it is worth doing.
1) - declare dividends and pay all profits of the company to the trust and then distribute the maximum (up to 30%) to each beneficiary - then any extra - distribute to the bucket company (have not had to do this yet - but may have to in the future)
2) - declare and pay just enough dividends to the trust so that it can distribute the maximum to the beneficiaries and leave the excess in the company to distribute at a later date... no bucket company needed
the problem with option 2 is the liability - leaving funds in the trading entity that you can be sued for.... if you do something wrong like not carrying enough public liability - workers comp - tax office penalties etc... its better to move it into the bucket company so that creditors cannot get access to it....
depends on how much money you are talking about as to whether it is worth doing.
In 1. The ONLY way the trust gets income is from company divs IF they are declared. So taxes of 30% are paid by company then extra tax paid by beneficiaries assuming they have final taxable income of 37K or more. If that's the case then minimum tax rate is now 40.9%...Or as high as 76% marginal rate for a taxpayer with taxable income of $180K + The tax issue for the bucket company approach is if the divs aren't actually paid to the trust there is a unpaid present entitlement. A Div 7A issue for the bucket co approach.
The Director liability is more the concern in the other examples. ATO penalties don't care if or where money is. The issue is less one of paying a dividend and one of what the loan accounts look like. Paying a div is fine but if the company is owed money its still an asset and can be clawed back.
The more $ the bigger the issue and more of a lure the bucket company becomes. However the reality is in such cases that nobody wants to pay the final tax. They want the sham of a bucket co and then "borrow" from the company or use the proceed in other ways = Div 7A
