In the lead up to 30 June 2021, we want you to know why using a “bucket company” can be a great strategy for saving tax on trust profits distributed.

DO YOU HAVE PROFITS FROM A TRUST?

Do you have a Discretionary or Family Trust that generates profits? If yes, then this strategy may apply to you.

A “bucket company” allows you to “cap” the tax on profits distributed by a trust to 30% or 26%. 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 the business.

Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $67,574 (27%)

Option 2: Distribute $90,000 each to Individuals 1 & 2 and distribute balance of $70,000 to a “bucket” company at a 26% tax rate. Total tax payable = $59,074 (24%).
(Note: This strategy assumes that the $70,000 in cash is available to be distributed to a bucket company, otherwise what is known as a Div 7A Loan Agreement will need to be entered into and loan repayments made over a 7 year period.)

The VALUE of this strategy is $8,500 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 26%.

As your expert Accountants, we are very aware of these tax laws and can make this easy for you.

NEXT STEPS: 

Contact us today and book your free Tax Planning meeting. The sooner we get started, the sooner we can help you save tax using a “Bucket Company” – well before 30 June 2021 for enough time to implement tax-saving strategies.

 Imagine what you could do with your tax saved:

  • Reduce your home loan
  • Top up your super
  • Save for a holiday (when we can all travel again!)
  • Deposit for an investment property
  • Pay for your children’s education
  • Upgrade your car

We look forward to helping you soon!