Tax Minimisation

A small one man band may be a sole trader as there is no need to income split and adminsitrative costs are reasonably small. A family couple may use a partnership and split the income, generally 50/50 and again the administrative costs are reasonablly small. With both sole traders and partnerships the proprietors are personally liable for business debts. With sole traders the income is taxed at the individuals marginal tax rate which could be as high as 38%. If the partners in a partnership are individuals then the income is returned in the individuals name and therefore some or all of the partners' incomes may be taxed at 38%.

Companies have the flexibility of being able to pay salaries to the shareholder/directors and/or leave the income in the company to be taxed there. Companies are currently taxed at a flat 30%. Companies are a common business entity because they look more businesslike and the owners of the business (ie the shareholders) are not personally liable for the business debt.

In a family trust you would often have the family home, shares in the family company, any investments and anything else that is likely to generate income or appreciate in value eg a beach property. Any assets in the trust can be protected from creditors. A trust can be a passive entity or it can operate a business. A trust that operates a business is callled a trading trust. Trusts are taxed at a flat 33%.

Through the appropriate use and structure of the above entities we can usually ensure that any income above a market salary for the individuals is taxed at no more than 33%.

Please come and discuss your existing business structure and we can soon advise if it is appropriate in your circumstances. This service would be free of charge.




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