As a business owner, you work hard for your money. Whilst being a business owner comes with lots of benefits like a more flexible work day and a sense of personal achievement, every business owner knows the long hours and dedication to make that business successful. So it’s important to know that your accountant is as dedicated as you are, and has given full consideration to your tax structure. Having the correct business structure is the only way to minimise tax in both the short and long term, protects your assets in the event of unforeseen circumstances and maximise options and minimise tax when the business is ultimately sold or transitioned to the next generation.
So what are the four three golden rules in structuring?
Every business structure, without fail, should involve a company AND a trust
A trust is the only way to maximise flexibility and minimise tax. A company is the only way to make sure you can “walk away” from unsecured creditors.
Investment property should NEVER be owned by a company
Every other asset owner receives a 1/3 to 50% discount on selling an asset, merely for having held it for 12 months or more.
Investment Assets should never be owned by the trading entity or the “at-risk” spouse, and there should only ever be one director.
Separate Risk from Wealth. Have one “at-risk” spouse (i.e. the director), whilst the other spouse owns the family home and investments (via a trust or beneficially). Why have two people responsible for the business when you only need one?
One Property per Trust
For the sake of a small one-off setup fee, avoid land tax by setting up a new trust for each property purchase.
What if I’m not structured this Way?
The most common example of a poor structure is a company with “Mum and Dad” as directors and shareholders. If the business trading structure does not contain a trust, the private wealth of the family will be at risk, the business will pay much more tax than it should, and the options for business succession will be limited. It is that simple.
If your business structure is less than ideal, there are ways of “fixing” the structure. Sometimes, this can be done with minimal or no tax, and can even have the added bonus of converting non-tax deductible debt into tax deductible debt. If you would like a health-check on your business structure and tax returns, call Shara on 07 4184 9900 to book your FREE one hour, strictly confidential, no-obligation review of your business.
Shara has 18 years of experience specialising in business taxation and as a partner in one of the largest accounting firms outside of the Brisbane CBD. Shara was placed in the top 5 per cent of Chartered Accountants in Australia. Shara now operates a boutique accounting firm, with a focus on creating meaningful client relationships, delivering strong quality of service and offering the best possible solutions.