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James Millar
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Some general comments.

An alternate structure to sole trader (ie company or trust) is generally only viable if

(a) In the case of both a company or trust – the additional business income is significant enough to produce tax benefits that justify the ongoing cost

(b) In the case of a company – that you don’t need the money personally and you can leave in the company at the flat 27.5% rate (assuming you are above this personally).

(c) In the case of the trust, you have other beneficiaries that are on lower tax rates.

So the use of a company or trust for a smaller side business can actually be counterproductive in terms of overall economic cost. However those structures may have the benefit of personal asset protection which is more valuable to some than others. For example, if you were starting a sky diving business then we would strongly advise against sole trader structure (if you had significant assets in your own name – insurance can fail).

The typical FS member that is looking at a small scale side gig would not normally satisfy these. (but without advice they often go ahead anyway only to find that it has cost them far more to setup and run a company with no perceived benefits. If they only paid a modest fee to a half decent accountant to advise they would have avoided it all).

The safest and wisest approach is generally …if in doubt then don’t do it.

Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900