How to “cap” the tax on trust distributions using a “bucket company” – SAVE TAX!
In the lead-up to 30 June 2019, we want you to know why using a “bucket company” can be a great strategy for saving tax on trust profits distributed.
PROFITS FROM A TRUST?
Do you have a Trust that generates profits? If yes, then read on!
A “bucket company” allows you to “cap” the tax on profits distributed by a trust to 30% or 27.5% This is much less than the individual top marginal rate of 47%!
Here’s how this works:
Assume a trust earns $250,000 in profits from business or investment.
Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $72,494 (29%)
Option 2: Distribute $90,000 each to Individuals 1 & 2 and distribute balance of $70,000 to a “bucket” company at a 30% tax rate. Total tax payable = $66,194 (26.48%)
Value of strategy is $6,300 in tax saved!
The cash in a “bucket company” can be used to invest in shares, property, or to lend to other entities at a specific interest rate.
But: You need to discuss this with us BEFORE you do it.
There are different tax laws that affect the use of this strategy, and whether your “bucket company” can use a tax rate of 30% or 27.5%.
As your Accountants, we are very aware of these tax laws and can make this easy for you.
Please contact our team today to implement this!
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
