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  • #999881
    b73
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    Hi all,

    My previous venture was a business run in a family trust.
    I used to distribute $16 or 17k each year to my mother as it wasn’t taxed and didn’t hurt her circumstances.

    My current business is a Pty Ltd company. I wish to do the same and pay an amount to my mother.

    Can I just have her invoice me as an individual for the ‘admin work’ she does for me?

    Or is there a good reason I should establish a trust and distribute profits through that and then on to mum as a beneficiary?

    I will be discussing this with my accountant, but would like to better better educated before initiating this conversation.

    Thanks!

    #1221740
    James Millar
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    If she does legitimate work for the business then she could be employed with super etc. Having her invoice your company (She would need an ABN) runs the risk that the ATO consider her an employee rather than contractor – so you will get hit with fail to withhold penalty which is significant and based on the gross amount paid. Final option is that the shares in the company are owned by a discretionary trust but transferring them now might trigger CGT depending on the value of the company. And of course you have extra compliance costs which is not ideal. The final option would be best if you thought there would be ongoing opportunities with family beneficiaries.

    The only other thing to consider is just make sure your company is not subject to PSI because it will invalidate income splitting and assess all to you.

    Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900
    #1221741
    b73
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    Thank you James, you raised some excellent points.

    When my accountant set up the pty ltd he also setup a disc. trust, which I haven’t used to date.

    I was trying to simplify this payment to one step, but I guess the best method might be to move profits to the trust, then distribute to my mother as a beneficiary??

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