Family Business Distribution Rules Explained
Rules explained:
If you’re distributing to a family member, the money should directly go to them, and they should be the one utilising that money for their economic benefit.
If you’re a family business and you distribute funds to your spouse, that’s generally acceptable. For example, if you transfer the money to a joint account and spend all the income together, it’s considered permissible.
If you’re a parent and your children are living with you and you provide financial support by giving them money directly, you can distribute that money through your business instead.
If the idea of the whole distribution was just to reduce your tax, then that’s going to be a no. You have to be very careful about what the reason is, and what sort of arrangement you have with your children as well.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Business Structure Tax Rates
Business Structure Tax Rates
You can use a business structure for doing anything like investing in shares, separating your assets out of your personal name. Also, you can even run a businesses out of companies and trusts. We use that a lot with our clients here at Inspire when we are structuring their businesses where we incorporate companies and trusts into their family group. This is where we take into consideration the business structures tax rates.
A reason to incorporate trusts or companies is because of the investment in cryptocurrency. One of the big reasons why you might want to do that is because of the alarming tax rate where individuals pay up to 47% tax, depending on their income.
You will learn
- the different business structure tax rates – company, trust and SMSF’s
- what is tax planning at Inspire
- what is asset protection at Inspire
The business structure tax rates:
Company
Companies are taxed at two different rates, depending on what the company does.
- 30% Tax Rate– If it’s a purely investment company. It doesn’t run a business, a business of trading cryptocurrencies, or a business of mining cryptocurrencies. 30% tax rate is a passive investment, and not an active trading.
- 25% Tax Rate– is for small business concessions. You need to have most of the company’s income to access this lower 25% tax rate. You can see 25% is almost half of the highest marginal tax rate of an individual.
We are not saying, “Everyone, just set up a company if you’re trading,” but that is something that we might consider if we were to advise you on what structure to use for your investments.
Trust
A trust doesn’t necessarily not pay tax, but a trust gives its profit to other individuals or companies or other entities in the family group, and they pay the tax on the trust’s behalf. We do have clients who invest through trusts and they have to distribute at the end of each year the profits. The people who receive that pay the tax.
SMSFs (Self Managed Super Fund)
There are two rates of taxes for SMSFs.
- 15% Tax Rate– is what we call the Accumulation Phase where you’re growing your balance in super throughout your lifetime. Majority of Australians are in the accumulation phase, and they’ll be paying 15% tax on the profit that they make in their SMSF.
- 0% Tax Rate– is for the Pension Phase. When you’re drawing on your super at a certain age or older, and you’ve met the conditions of release for super, then you have the option for your super to be taxed at 0%.
Tax Planning
Tax planning is about your ability to be flexible and proactive with tax. We don’t get a lot of room to move for individuals but we do with companies, trusts, and especially SMSFs.
Asset Protection
At Inspire, we work with a lot of business clients and so asset protection is key with what we do. Basically, we want to make sure that the business is not in their own name as a sole trader. If the entities are set up right, we get some form of protection.
Want to learn and watch more about cryptocurrency tax?
- Watch the full webinar recording ‘Cryptocurrency Tax Masterclass’ on our facebook page
- 6 Tips To Reduce Your Crypto Tax
- Tracking Crypto Transactions For Tax
- Tax Warning For Crypto Hobbyists
- Can You Delay Crypto Tax Bills?
Got a burning question you want to get off your chest? Book a complimentary 20-minute strategy chat with an Inspire Accountants.
Get 20% Extra Tax Deduction On Tech Expenses
Get 20% extra tax deduction on tech expenses with the Small Business Investment Technology Boost
You can claim extra 20% on expenses that support digital operations and digitising operations, such as:
- Digital Enabling Items – e.g. cost to set up a digital payment system, any subscriptions that help digitisation etc
- Digital Media and Marketing – Audio and Visual content that can be created, accessed, stored or viewed on digital devices
- E-commerce – Supporting digitally ordered or platform-enabled online transactions.
The concept here is that you can claim an additional 20% as a tax deduction. For example, if you have spent $100,000 (which is currently the limit), you will be able to claim a deduction on $120,000, allowing you to claim 20% on the increased amount of $120,000.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Why I Will Probably Never Retire
Here’s a snippet from the Young Family, Small Business Podcast where we did a reverse interview with the host, Ben Walker.
The question was asked, “When are you going to retire? When are you going to stop working and enjoying life?”
“When are you going to retire? When are you going to stop working and enjoying life?”
In all honesty, I feel like I will never retire.
But I’ll refine my working week, my life with my kids, and my family so that I can do what I love. I’m aiming from 80% to 95% of the time with balance. And if I do that till the day I die, that’s winning.
One of those things that sink into my mind is what, if money wasn’t a thing? If you asked me that question, I’d be sharing this wealth for life message with clients, growing our team, helping them, being able to service the work with their clients better and all the training that goes into that. Personally, helping out with some tricky client advice restructures, and financial control – this lights me up and gets me out of bed.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
The New Tax Strategy For
EV Buyers
The government is encouraging the uptake of electric vehicles with this new strategy. If you buy an electric vehicle before the end of this financial year (30 June 2023), you can claim it as a tax deduction in your business.
Previously, if your logbook had 50% business use, and 50% private use, you could only claim 50% of the car in your business.
But what’s happening with the electric vehicles, regardless of what that percentage use is, even if it’s 50% personal use and 50% is business use, you can claim 100% of it still. Since it is FBT exempt there are no tax consequences.
It’s beneficial for professional people who don’t travel much and usually have less of that logbook percentage and are able to claim really less of their cars anyway.
NOTE: This would have some impact on your reportable Fringe Benefits on your tax return which can change HECS payments and some other government benefits.
Watch the full webinar, Tax Planning in 2023 and learn the tax saving strategies business owners need to know before 30 June at https://youtu.be/dqE_6X7utjM
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Great Tax News For Businesses & Individuals
Unlocking great tax news for businesses & Individuals
Small business skills and training boosts.
This was released in March, earlier this year. If you make an investment in training, or in your employees, there’s some eligibility criteria that’s not being taken off the table, not that we can see. And draft legislation is also under consultation right now which is great news because some people acted on that back in 30th of June ‘22 as part of some of your tax planning strategies as well.
Self education expenses.
This is more for individuals, but if you incurred any expenses to educate yourself in relation to the job or the work that you do, you can claim a deduction.
Previously, they would reduce the course or the self education expense by $250, they’re trying to get rid of that which is still in place.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Write Off Bad Debts To Reduce Tax
In a scenario where you have provided a service to someone and they refuse to pay despite your efforts to resolve the matter, it may be wise to consider writing off the unpaid invoice instead of dwelling on it. By doing so, you can claim it as a deduction in the same tax year instead of keeping it as a receivable on your books.
However, it’s important to note that you shouldn’t write it off too soon. If you haven’t exhausted all possible means of recovering the debt, it may not be appropriate to write it off. But if you have taken all necessary steps, then you can proceed with writing it off and claiming the deduction.
https://inspire.accountants/chat/If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Ben Walker Gives Tips For Sustainable Success
Being a business owner, you’re not capable of doing everything. You need to delegate and let go of some core business and key responsibilities for sustainable success.
You have so many lives and livelihoods under your responsibility, which is why oversight is crucial.
We’ve seen some business owners just brush off tasks as ‘someone else’s problem,’ but the truth is, even if someone else is doing it, it’s still your problem if that plate drops at the end of the day.
Delegating while still maintaining oversight is crucial for sustainable success and work-life balance.
You need to make sure you don’t get stuck in the business to the point where you neglect spending time with your family. Ben Walker, Founder of Inspire said, “I’ve made so many of those mistakes in the past. There comes a point where you have to snap yourself out of it and ask yourself, what am I here for? Once you’ve had that realisation, you make necessary changes and keep pushing forward.”
By finding the right balance between delegation, oversight, and personal priorities, you can build a thriving business and lead a fulfilling life.
We firmly believe that having a strong team around you is one of the most crucial factors for success. Having a reliable and capable team can make all the difference in achieving your goals.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
How Do Banks Calculate Buying Capacity?
We invited Colin O-Loughlin, Director and Mortgage Broker of Arch Brokerage on the topic, “Buying A Commercial Property In SMSF”. In the video he walks us through how banks calculate the buying capacity.
When it comes to securing a loan from a bank, understanding how they calculate buying capacity is essential.
Other things that banks will consider, on a case by case basis, is the remaining assets and funds, and the potential returns that they’ve got coming back into the fund.
Keeping in mind, the combined net incomes need to provide a minimum 1.25 times cover of the assessed debt repayment.
Essentially, let’s say that you had a repayment of $50,000 a year from a loan.
It just needs to cover 1.25 times that with the income.
So, if we looked at $50,000, as long as there’s about $62,500 in market rent, super contributions, or potential remaining returns, then it would be sufficient to tick off and be able to get the loan.
There’s no extra buffers or worries or anything else that you need to consider when looking at it.
It’s a very simplified version of, “Is there enough income coming in? What’s the outgoing? And is there a positive part there?”
That’s a simple view on how the buying capacity is calculated from the bank’s point of view.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Is A Budget The Same As A Forecast?
On a recent webinar, a client had asked, “Is a budget the same as a forecast?”
Here’s what we said –
We prefer to use the word ‘budget’.
There are many different ways that Accountants, or CFO people forecast or budget. For us, it’s using the budget feature in Xero.
We use this in our own business and it’s working well. It gives us so much clarity. Our team gets involved in it. And there are forecasting add-ons you can get with Xero that take your budget and turn it into a cash flow forecast or a three-way forecast. It relies on your Xero chart of accounts and your budget being spot on.
If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions.
From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax.
Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us.
Get Cashed Up
