Business Structure Tax Rates Company Trust SMSF

 

You can use a business structure for doing anything like investing in shares, separating your assets out of your personal name. 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. 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 Video: Tax Rules For Business Structures

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