Using the right accounting / taxation structure can have a dramatic effect of the amount of tax you will pay and how protected your assets are.

When it comes to making and investment of starting a business, typically the following structure are available:

1.    Sole Trader
http://www.mcnamaraandcompany.com.au/blog/what-are-the-advantages-and-disadvantages-of-operating-a-business-investment-as-a-sole-trader

2.    Partnership

http://www.mcnamaraandcompany.com.au/blog/what-are-the-advantages-and-disadvantages-of-operating-a-business-investment-as-a-partnership

3.    Company

http://www.mcnamaraandcompany.com.au/blog/what-are-the-advantages-and-disadvantages-of-operating-a-business-investment-as-a-company

4.    Trust

http://www.mcnamaraandcompany.com.au/blog/what-are-the-advantages-and-disadvantages-of-operating-a-business-investment-using-a-discretionary-trust

5.    Superannuation Fund (for investing only)

http://www.mcnamaraandcompany.com.au/blog/what-are-the-advantages-and-disadvantages-of-a-self-managed-superannuation-fund-smsf

Each of the above has its advantages and disadvantages.

Under the Governments new budget it will now be possible change structures providing that you are a Small Business Entity without having to worry about capital gains tax issues.

From a tax perspective consideration must be given to the marginal tax rates and how they interact with the company tax rate.  The company tax rates may seem attractive to those on high incomes, but Division 7A will in most circumstances cause additional tax to be paid at the marginal rates.

Superannuation has the most generous tax rates, particularly when members are in pension phase.  However, access to funds (a condition of release) is generally not available until age 55.

The marginal tax rates https://www.ato.gov.au/Rates/Individual-income-tax-rates/

Company tax rates https://www.ato.gov.au/Rates/Company-tax/

Division 7A  https://www.ato.gov.au/Calculators-and-tools/Division-7A-calculator-and-decision-tool/

Superannuation tax rates https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=26#Other_super_rates_and_thresholds

If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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