you missed the point cata
the question is “I was told by someone that there is way to set up a structure to never pay over 30%???
Is this fact??
and they where talking about “a hypothetical; lets say we earn $200K “
TAX ISSUES is their main concern….
Secondly introducing a statement as….
“and what if you could keep your taxable income in an even lower tax bracket”
is totally “pie in the sky” stuff…..
if you’ve got something with substance, share it with all of us, otherwise keep it to yourself.
we don’t need teasers.
thirdly…I don’t understand the relationship of the 150 elected federal politicians and trusts….and its relevance to the argument????
and can you clarify the 81%
do you have the names of member of parliament that have trusts??
Finally, having established my discretionary trust 30 years ago when high income earners were paying 60% tax on income over $50k, i feel i have creditability in asking……
“Cata…put your money where your mouth is….. show us how to pay less than 30% tax……LEGALLY“
because i can tell you..over 30 years i’ve meet lots of yan…rs in the tax deduction industry
hbHello All
I think we may be getting into trouble here because we are talking apples and potatoes without some of us realising it.
I believe we are mixing up tax rates (or tax brackets) and effective tax rates.
Kel Fitzalen from Deloitte clearly states that on about $150K the effective tax rate will be the same as the 30% company tax.
That’s true.
Even though all the dollares over $75K attract the 40% tax rate, given that the dollars under $25K are either tax free or taxed at 15%, the effective tax rate is around 30%.
If my calculations are correct an individual will pay $47,850 in tax on $150K while a company with this income will pay the flat 30% which is $45K.
But it’s also true that by splitting this $150K across two people you can both keep the top rate paid on any dollar down to 30% and reduce your effective tax rate down to 23%.
Naturally you could simply have a partnership between the 2 people but a trust gives you so much more flexibility. You (as the trustee) can decide how to distribute the income each year anew . Your cirumstances don’t remain stable over 30 – 40 years.
Actually, with Johns DT and his hypothetical $200K, split 2 ways, (forgetting the kids for the moment) his effective tax rate will be 27.89%. By allocating some of the income (book entry and legal) to other family members (depending on the trust deed) he could even limit the tax rate paid on any dollar to 30%.
hb don’t knock the $700 (it may be more now?) for the kids. It may not save you much tax in 1 year but it sure is a nice way to build a pre tax dollar nest egg for your kids. You could of cause just give them the same amount when they turn 18 (700 X 18 = $12,600)but you may have had to earn $31,500 to do it.
Also over 18 you can allocate your kids as much income as you want from the trust. You will need to give them money to study etc. anyway so why not give it to them tax free or at a very low rate. Why give it to them after you’ve finished paying the tax man 40 cents (or even 30 cents) on the dollar.
Clearly trusts have their purpose only one of which is tax minimisation.
I hope this helps cool the air [upsidedown]
Cheers Elka
Thats a good post Elkam.
And there is also the option of a bucket company when all other beneficaries have reached the 30% tax threshold. This will cap your tax at 30% as this is the company tax rate.
First of all I am not a tax accountant, I am a Asset Protection Specialist, but this is what I do with my tax.
My tax barrister recommends it to me and he also tells me that the laws regarding trusts will not change much because of the pollies that use trusts.If your accountant does not know this then I would be looking for a new one as I believe that it is pertty standard stuff.
I hope that this has answered your questions HB, if not maybe asking nicely will help.
CATA
Asset Protection Specialist
[email protected]I must thank everyone that has contributed to this topic.
Thanks!!!!
Its been a great help!!!
JohnCan a ‘bucket company’ be set up at any stage and added as a beneficiary to an existing trust? or must it be established as a beneficiary from the moment the trust is set up?
thanks
Toni
Hi Toni
This will depend on the deed of the trust. Some will allow you to add/remove beneficaries with a minute entry, others will need resettling (this is the expensive one).
CATA
Asset Protection Specialist
[email protected]Toni, many deeds will be worded in a way that allows a company to be set up at any stage and automatically be a beneficiary if one of the trustees or appointers is a shareholder or director or office holder of that company. In this case nothing will need to be changed, and no minute would be necessary.
Changing beneficiaries can cause resettlement and this will result in stamp duty and CGT being charged on all the trust assets, as it is consided to be a new trust forming. This needs to be avoided at all costs!!!!
Terryw
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Parramatta
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Hi Guys,
[offtopic] off topic a bit but can I have a family trust – Discretionary trust with the beneficiary to include my nieces and nephews?
Just for tax purposes where $1400 can be a write off allocation per year.
Curious
ptnHello ptn
The short answer is yes. If the trust deed allows it.
Any trust deed worth anything should include such close family members and many many many more. Not by name but as a catagory.
However I don’t think saying that it’s “just for tax purposes” is wise. [rolleyesanim] [smiling]
Cheers
Elka
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