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Posted: 17 Dec 2007
With the recent reductions in tax rates and the low income tax offsets, now is the time to review your current business structure.
A table of the new individual tax rates is below.
2006/07
Taxable Income Tax
Rate
$0 – $6,000 Nil
$6,001 – $30,000 15c for each $1 over $6000
$25,001 – $75,000 $3,600 plus 30 cents for each $1 over $30000
$75,001 – $150,000 $17,100 plus 40 cents for each $1 over $75,000
$150,001 + $47,100 plus 45 cents for each $1 over $150,000
Plus Medicare Levy 1.5%
The current trend in business structuring is to set up a family trust with a corporate trustee.
The corporate trustee (a company) provides legal protection over personal assets from business creditors and the family trust provides maximum flexibility in distributing profits. Additionally, children under 18 can now also receive $1,333 each tax free, effectively saving an average of $400 tax per child. Also, with some careful planning WorkCover liabilities can be reduced.
As can be seen from the above tax table, individuals can have a taxable income of $75,000 before paying more tax than the company tax rate of 30 per cent - more business profits can now be paid to individuals before a company structure provides a better taxation solution.
As each family and business is different, there is no one right structure for everyone. Talk to Tas Demos to discuss all your options.
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