A book keeper advised me that I can have my income put into a trust, then have the trust distribute half to me personally, and the other half stays in the trust.
The benefit of this setup is that if I earn $100k as sole trader income, the top $40k would usually attract 47% tax, whereas via the trust arrangement, the trust has its $50k taxed, and I have my $50k personal income taxed separately.
My accountant didn’t tell me this. He basically said because I don’t have a spouse or dependents, there’s no point to a trust.
Bruce
Mooloolaba, QldBruce, I think this was a loophole that the govt recently closed. I would suggest you speak with an accountant regarding the possibility or otherwise (but also, if the money stays in the trust, it will be taxed at 47.5%).
I have no spouse or dependents, but I do have siblings, a nephew and parents. they are all listed in my trust (a trust can be very broad, and a discretionary trust allows you to choose who gets the money, so you don’t have to give anybody anything).
Definitely speak to a good accountant. If nothing else, a trust affords you more asset protection than a sole trader.
Cheers
MelYes the Govt has cracked down on this and therefore even if you trade thru a trust, the icome may have to be attributed to yourself personally. It is called the alienation of personal services income (I think), and you can probably find inof on the ATO site.
And if money is not distrubted from a discretionary trust, the income must be taxed at the top marginal rate.
But do talk to a good accountant as there may still be a way around these new rules.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
thanks guys. I am seeing another accountant next week recommended by DaleGG (somersoft forum) in Melbourne. He spoke highly of Dymphna Boholt and Barbara Page at Active Financial Answers on the Sunshine Coast.
Bruce
Mooloolaba, QldPlease let us know what your accountant says. and Good luck
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I saw Barb Page today. She seemed to live up to her reputation. Re trusts, there is a multiple trust arrangement where an operating business exists under a corporate trust, other investments such as individual IP renovations are placed under unit trusts, and income from all trusts are channeled into a discretionary trust.
As for the earthmoving idea, I have since reverted to property, in this instance, I am looking at + CF commercial IPs, and a new industrial lot that I will attempt to flip before settlement in 7 months.
Bruce
Mooloolaba, Qld
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