We had a new client who was receiving distributions from their business of around $1 million each year into a discretionary trust.
In prior years they had done no tax planning and had been splitting the income between them. this resulted in them paying approximately $230,000 tax each per year.
After reviewing their position for the current year which had a similar business income we were able to reduce their tax significantly by:
- Implementing a corporate beneficiary structure and preparing a schedule to manage their Division 7A requirements/ repayments each year.
- Helping them to understand their superannuation caps – with their financial planner advising them to maximise their contributions.
- Bringing forward some planned capital purchases in the business which minimised the distribution for the year.
- Advised them to obtain a quantity surveyors report for their rental property which allowed a considerable deduction for depreciation on their building.
After implementing each of our recommendations they saved $140,000 each in tax in the first year.
The combined tax savings for that year and the following years would allow them to pay off their home loan 7 years earlier than they had originally planned.