How using a bucket company can save tax on your trust distributions
10 April 2019
In the lead-up to 30 June 2019, we want you to know why using a bucket company can be a great strategy for saving tax on trust profits distributed.
PROFITS FROM A TRUST?
Do you have a Trust that generates profits? If yes, then read on!
A bucket company allows you to cap the tax on profits distributed by a trust to 30% or 27.5% This is much less than the individual top marginal rate of 47%!
Here’s how this works:
Assume a trust earns $250,000 in profits from business or investment.
Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $72,494 (29%)
Option 2: Distribute $90,000 each to Individuals 1 & 2 and distribute balance of $70,000 to a bucket company at a 30% tax rate. Total tax payable = $66,194 (26.48%)
Value of strategy is $6,300 in tax saved!
The cash in a bucket company can be used to invest in shares, property, or to lend to other entities at a specific interest rate.
But: You need to discuss this with us BEFORE you do it. There are different tax laws that affect the use of this strategy, and whether your bucket company can use a tax rate of 30% or 27.5%.
Contact us today! The sooner we get started, the sooner we can help you save tax – well before 30 June for sufficient time to implement tax saving strategies.
Imagine what you could do with your tax saved!
- Reduce your home loan
- Top up your Super
- Have a holiday
- Deposit for an Investment Property
- Pay for your children’s education
- Upgrade your Car
Contact the team at Shakespeare on 9321 2111 if you’d like to discuss how this may apply to your individual situation.
Source: Change GPS
General disclaimer: Our firm provides the information on this website for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles on this website are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose