On Low Income Businesses (under $80k per person p.a.)
Type |
Income Tax |
Capital Gains Tax |
Security (Bus Assets) |
Security (Personal Assets) |
Flexibility |
Cost |
Sole Trader |
✓ |
✓ |
x |
x |
x |
✓ |
Partnership |
✓✓ |
✓✓ |
xx |
xx |
x |
✓ |
Company |
x |
x |
x |
✓ |
✓✓ |
x |
Unit Trust |
✓ |
✓ |
x |
✓ |
✓ |
xx |
Family Trust |
✓✓ |
✓✓ |
✓ |
✓ |
xx |
xx |
On High Income Businesses (over 80k per person p.a.)
Type |
Income Tax |
Capital Gains Tax |
Security (Bus Assets) |
Security (Personal Assets) |
Flexibility |
Cost |
Sole Trader |
xx |
✓ |
x |
x |
x |
✓ |
Partnership |
x |
✓ |
xx |
xx |
x |
✓ |
Company |
✓✓ |
x |
x |
✓ |
✓✓ |
x |
Unit Trust |
x |
✓ |
x |
✓ |
✓ |
xx |
Family Trust |
✓ |
✓✓ |
✓ |
✓ |
xx |
xx |
A good structure for reasonable size small to medium businesses should involve one or more operating companies. Running different businesses in different companies would protect each business from the risks associated with other businesses. It would be ideal for a master Family Trust to hold the shares of the operating companies.
The income tax rates of the companies may be as low as 27.5% and may be reduced further to 25% in future. The marginal personal tax rates range from 0% to 46.5% on high income levels. There will be no additional taxes on earnings left in the companies. Any dividends issued will be received by the master Family Trust. The trust may distribute the dividends to family members. If a member's marginal tax rate is lower than 27.5%, then a refund will result. If the opposite is true, then this will result in additional tax. If the distribution is made to another company (in this case, the investment company, or any other operating company), then there will be no additional tax. As the master Family Trust is a discretionary trust, it may pick and chose to distribute for the best tax outcome.
In this type of structure, it is possible to utilize losses of entities within the structure. Please note that, all trust need to make Family Trust, and companies Interposed Entity elections with same specified individual family member.
The income tax rates of the companies may be as low as 27.5% and may be reduced further to 25% in future. The marginal personal tax rates range from 0% to 46.5% on high income levels. There will be no additional taxes on earnings left in the companies. Any dividends issued will be received by the master Family Trust. The trust may distribute the dividends to family members. If a member's marginal tax rate is lower than 27.5%, then a refund will result. If the opposite is true, then this will result in additional tax. If the distribution is made to another company (in this case, the investment company, or any other operating company), then there will be no additional tax. As the master Family Trust is a discretionary trust, it may pick and chose to distribute for the best tax outcome.
In this type of structure, it is possible to utilize losses of entities within the structure. Please note that, all trust need to make Family Trust, and companies Interposed Entity elections with same specified individual family member.
Land Tax Issues:
Properties held by discretionary trusts will not be grouped, but will be taxed with a surcharge of .0325%. Holding a property in a discretionary trust provides best protection against business risks. If a small value of property is held, then trusts will result in higher land tax. On the other hand, if large value of multiple properties are held, then holding each property in a separate trust will result in lower land tax.
Properties held by discretionary trusts will not be grouped, but will be taxed with a surcharge of .0325%. Holding a property in a discretionary trust provides best protection against business risks. If a small value of property is held, then trusts will result in higher land tax. On the other hand, if large value of multiple properties are held, then holding each property in a separate trust will result in lower land tax.