Hello
I have some questions regarding corporations in Australia. Can you choose to set up a corporation around your assets to shield the income they generate from tax? I am not sure if this is allowed in Australia or not.
If this is possible, how is it that you can access the funds, for example, to pay yourself a wage? Does this transaction attract regular income tax?
Any comments, explanations are appreciated.
Hi gringer, welcome to the forum.
I’m not sure if I understand your question correctly.
Are you saying that you have several assets already, and you wish to set up a company that will then own these assets instead of you?
If so, the answer is yes, you can do it, however there is a large cost. If you were to transfer these assets to the company, you would (in the eyes of the tax man) be ‘selling’ them to the company, and would need to then pay CGT on any gain you personally have made, plus (if property) stamp duty on the purchase by the company.
So I guess for all intents and purposes, the answer is really no.
If you set up the company/trust first, you can then buy the assets in that name, and shield them from ‘predators’ and help to minimise your tax.
Cheers
MelHi Mel,
Thanks for the welcome and your response.
I currently don’t have any assets but I do plan on building some to eventually achieve a positive cash flow.
From what you said, I can form a company/business/trust, buy the assets in the name of the entity. Then I can spend as many pre-tax dollars as I like and write them off as company expenses, then pay tax on what is left. Is this correct?
Another thing I was not sure about is how would one access funds from say, a trust which owns all your properties. Would you pay yourself a wage from the entity? Does this attract income tax?
Thanks for any replies.
Michael
Gringer,
Then I can spend as many pre-tax dollars as I like and write them off as company expenses, then pay tax on what is left. Is this correct?
Depending on what those expenses were and if they were allowable under current tax law, yes.
If this is possible, how is it that you can access the funds, for example, to pay yourself a wage? Does this transaction attract regular income tax?
If you pay yourself an income for work being undertaken as trustee or as an employee of the trust, then it would be captured as income earned on you personal income tax return.
James
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