The creation of wealth, or a net increase in the overall wealth of each business person that we service with taxation, accounting, and financial advice is our fundamental goal. Gone are the days when accounting firms can just process taxation returns on a yearly basis and provide no other service. Business clients , require financial, and taxation advice, on each transaction they enter into, in order, to make a proper informed management decision.
The objective of each business person is to increase the overall wealth of their organisation whilst minimising taxation through a legitimate business structure. Using the correct structure to conduct your business activity can significantly reduce the amount of taxation liability incurred.
Small business can receive substantial tax minimisation through changing the structure of the entity or instrument to which the business is operated. Take for example a partnership to which the partners are receiving the net income for the partnership. A more appropriate structure is a company where the distribution of income is split between the shareholder’s spouse of each partner.
Instead of the partner receiving all the net income flowing from the partnership, a change of structure to a company, the partners, or now directors, will receive a wage as employees of the company, with the remaining profits retained by the company to which tax is paid at $0.30 in the dollar. Under the changed tax regime for companies, dividends with a imputation credit, will now receive a refund where taxation paid exceeds the amount of tax payable, a tax refund is applicable
The other advantage in the change of business structure is that the company can receive a taxation deduction of 100% for superannuation contributions made on behalf of the directors to a complying superannuation funds whereas, the partners, under the alternate partnership structure, would have received 100% up to $5,000, and 75% thereafter. This has been amended on1st July 2007 to the effect that self employed taxpayers now receive a 100%tax deduction for superannuation contributions. If the company employs a spouse for more than 10 hours per week then superannuation contributions can be made on behalf of the spouse. Furthermore, if the spouse is also a non working director then superannuation contributions can be made on behalf of the spouse.
Some of our clients have created their businesses out of nothing. They literally had little or no money when they started. One of our clients is worth over $2.8m, started his business 10 years ago with $2,000. The secret to good sound financial management is to use ‘an expert financial taxation adviser’ when entering into complex financial transactions. An accountant’s knowledge and expertise can be the difference between making the right decision over the wrong one.
The above advice must be qualified for each particular business and we take no responsibility or liability for the use of this material by any individual, or individuals, accessing this site. All advice and material contained on this web site remains the property of Parramatta Accountants and Tax Agents.