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James Millar
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I think you probably need to see an accountant but as a general primer. Thoughts are

  • “the business will involve property, real estate and retail”. Does that mean it will be part business (the retail activities) and part investment (real estate / property)? Is this commercial property to be used in the business or separate residential? Is it a passive hold investment or a develop and sell? You don’t want to mix the GST position if you can avoid it. My thoughts are that it would probably be inappropriate (for many reasons) to have all of these in the same entity.
  • Why do you think a company or trust is the appropriate vehicle for the passive real estate investments? Again, there are many reasons NOT to use these entities for passive investments – in particular if they are heavily (negatively) geared. You may also face land tax surcharges in a trust.
  • In short, the trust is only going to be useful if there are beneficiaries available on lower tax rates. The kids are no help until they’re 18. A corporate beneficiary can help you shelter at the 30% rate IF you pass the distributions across as cash in that year. That basically means you can’t draw out the money for personal use but rather you leave it with the company to invest.
  • Asset protection is an issue that can be managed. You passive investment activities are far less likely than your retail activities to create an exposure.
  • No you don’t pay tax twice on profits derived in a company. The company dividend franking imputation system operates to prevent double taxation at the individual shareholder level. So you get credits for company tax paid (at the 30% rate) and pay the difference up to your marginal rate (or get a refund if your personal rate is below 30%). Corporate beneficiaries are not eligible for the lower SBE rates.

If you intend on undertaking all of the above activities then you definitely need specialist advice with all of the facts being contemplated and addressed.

Happy to help by appointment at our office or Skype.

Regards
James

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900