Companies (xxx xxx Pty Ltd) are used more often for business rather than investment.  Attractive tax rate of 30% and they have the ability to pay franked dividends at discretion. The liability of shareholders is generally limited to the paid up capital of the company.

Advantages

1.    Limited liability.

2.    Tax rate capped at 30%.

3.    Small business tax concession may be available.

4.    Separate legal entity, so if a shareholder dies this will not mean that the company ceases.

5.    Funding is generally easier to obtain, banks and other lending institutions generally prefer them to trusts.

6.    Ability to make loans on commercial terms between related parties.

7.    Shares can be transferred easily unlike family / discretionary trusts.

Disadvantages

1.    Strict regulations governed by both Australian Securities and Investments Commission (ASIC) and Australian Taxation Office (ATO).

2.    50% discount not available.

3.    Losses stay with in the company and may be carried forward subject to Same Business Test and Change of Ownership tests.

4.    Adherences to Division 7A can make it difficult to withdraw money from the company at a moderate tax rate.

5.    Winding up a company may be difficult.

If you would like to discuss further please contact us:
McNamara and Co - 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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