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  • #986604
    bjmyers
    Participant
    • Total posts: 17
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    Hello All,

    After 13 years as an employee in public accounting, I’ve decided to set up practice on my own. I provide accounting, tax and bookkeeping services, based in the western suburbs of Melbourne. My aim is to build long term business relationships with clients and aspire to be their ‘trusted advisor’.

    No question is too small or irrelevant and I enjoy sharing my knowledge and experience with others looking for accounting advice.

    #1158611
    Tony Manto
    Participant
    • Total posts: 581
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    Well done Benjamin, I am sure you will do well.

    This is a great source of information and also leads.

    Don’t be scared to post regularly.

    #1158612
    No Limits
    Member
    • Total posts: 44
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    Welcome Benjamin,

    Accountancy advice is always welcome.
    I got a question for you:
    Assume someone started a business under a company structure and made 10 million net profit over a period of time.
    What would be the most tax effective way for a sole director to extract all profits from the business if they had to over the period of just 1 financial year?

    Thanks
    No Limits

    #1158613
    bjmyers
    Participant
    • Total posts: 17
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    Hi No Limits,

    Assuming that the sole director is also the sole shareholder, the most tax effective way to extract profits from a company is to pay a dividend. Provided the company has paid tax on the profits, the company can pay a franked dividend and pass credit for the tax paid to the shareholder. Instead of the shareholder paying the full 47% top rate of tax on the income, they only need to pay ‘top up tax’ of 17% being the difference between the top marginal rate and the company tax rate of 30%. Otherwise, an unfranked dividend is paid and subject to the full rate of tax. Depending on history, the company might need to pay a combination of the two.

    Paying a salary is far less effective, as the company would need to withhold tax from the payment and at that level would incur rather large payroll tax, workcover and superannuation guarantee bills.

    In any case, with the numbers you’re talking about and the significant tax bill involved, it would be wise to get specific advice from an accountant, tailored to your circumstances.

    Hope this is helpful.

    No Limits, post: 182922 wrote:
    Welcome Benjamin,

    Accountancy advice is always welcome.
    I got a question for you:
    Assume someone started a business under a company structure and made 10 million net profit over a period of time.
    What would be the most tax effective way for a sole director to extract all profits from the business if they had to over the period of just 1 financial year?

    Thanks
    No Limits

    #1158614
    Dave Gillen – Former FS Concierge
    Keymaster
    • Total posts: 2,566
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    Hi Benjamin,

    Welcome to Flying Solo! Thanks for your contributions to the forums already, and we hope to see you around here regularly.:)

    Dave

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