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.
Companies are taxed at two different rates, depending on what the company does.
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.
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.
There are two rates of taxes for SMSFs.
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.
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.
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