In the lead up to 30 June 2023, we want you to know why using a “bucket company” can be a great
strategy for saving tax on trust profits distributed.
Do you have a Discretionary or Family Trust that generates profits? If yes, then this strategy may apply to you. A “bucket company”
allows you to “cap” the tax on profits distributed by a trust to 30% or 25%. This is much less than the individual top marginal rate of
47%!
Here’s how this works:
Assume a trust earns $250,000 in profits from business.
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OPTION 1 Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $66,734 (26.7%) |
OPTION 2 Distribute $90,000 each to Individuals 1 & 2 and distribute balance of $70,000 to a “bucket” company at a 25% tax rate. Total tax payable = $60,534 (24%). (Note: This strategy assumes that the $70,000 in cash is available to be distributed to a bucket company, otherwise what is known as a Div 7A Loan Agreement will need to be entered into and loan repayments made over a 7-year period.) |
The cash in a “bucket company” can be used to invest in shares, property, or to lend to other entities at a specific interest rate.
We provide strategic business and tax advisory, underpinned by our expertise in financial planning to ensure we develop financial structures that are smart and well considered.
We'll dive into some of the everyday mistakes and tricky grouping issues that small businesses often encounter when dealing with payroll tax.
Maintaining control over cash flow is undeniably a complex balancing act. It's a challenge that lacks a quick and universal solution.
We'll dive into some of the everyday mistakes and tricky grouping issues that small businesses often encounter when dealing with payroll tax.
Maintaining control over cash flow is undeniably a complex balancing act. It's a challenge that lacks a quick and universal solution.
