CGT

[cropcos]

That doesn't sounds good tbh. It's looks like it isn't easy to be an investor in Australia. The only way to reduce taxes is invest from a personal acount and hold shares for more then 12 months right? if you earn from price changing. There is 50% discount of CGT right?


If I paid 150k CIT in 2010 and after this year I have no more earning in my company. In 2015 I want to pay myself a dividend of 350k. Do I still have this franking credits from 2010? Do I need to pay 48k or 131k as PIT in 2015?


Another question:
I have 1% of stake of company XXX which paid 5kk CIT and pay no dividend.
I have 100% of company YYY which paid 150k CIT and pay me 350k dividend.
Do I need to pay 48k PIT or can I use franking credits from XXX company ?


and one more:
Is there some other cost of wage besides PIT?

if you are a longer term holder of shares / greater than 12 months then yes being held by an individual is more tax effective than a company which does not benefit from the 50% cgt discount, even if you as an individual are already on the top tax bracket (income over $180k)

e.g. tax on $50,000 capital gain (held for 12 months or more)
2015 yr individual tax on $50,000 cap gain = $11,750 (50000 less 25000 discount, 25,000 x 47% top rate)
2016 yr individual tax on $50,000 cap gain = $12,250 (as above, 25,000 x 49% top rate)

2015 yr company (30%) = $15,000 (50,000 x 30%)
2016 yr company (28.5%) = 14,250

bear in mind the medicare levy for individuals has increased to 2% from 1.5% which makes the top rate now 47% (45 + 2). And from 1 july 2015 the temporary budget repair levy of an additional 2% is added to those with taxable incomes above $180k, this temporary levy runs for three tax years. So the effective top rate from 1 July 2015 is 49% on income above $180,000.

it is also proposed the corporate tax rate for companies with less than $5 million taxable income will reduce from 30% to 28.5% from 1 july 2015.

the franking credits you have in your company from 2010 or prior years are retained for use in future dividends paid by the company. however bear in mind if a dividend is paid in the next tax year when the corporate tax rate is reduced to 28.5%, your franking credit on the dividend paid to the shareholder is limited to 28.5%, even though the company may have paid 30% tax in the prior year on those retained earnings.

Wages - if you pay wages from the company you are required to withhold tax as you pay from the gross wage and pay to the ATO once a quarter. On top of the wage you are required to pay superannuation guarantee of 9.5% of the gross wage once a quarter. So an $80,000 wage would require an additional $7,600 to be physically paid by the company into your superfund. If you pay yourself a dividend you can avoid the super.

 

[So_Cynical]

Found this today : Capital gains tax discount calculator for individuals - some new rules If you were not an Australian resident for tax purposes after 8 May 2012 your discount may be reduced or you may not get a discount.

https://expertsystems.ato.gov.au/scripts/CA/Web/Default.aspx?PID=68&anchor=CGTDiscount#CGTDiscount

 

[McLovin]

That doesn't sounds good tbh. It's looks like it isn't easy to be an investor in Australia. The only way to reduce taxes is invest from a personal acount and hold shares for more then 12 months right? if you earn from price changing. There is 50% discount of CGT right?

Trade through a trust with a corporate bene. You can stream franking credits where you want and utilise the CGT discount by streaming cap gains to natural persons. Most countries around the world tax asset trading (ie less than 12 months held) the way Australia does, ie as ordinary income not capital gains. You need to speak to an accountant.

If I paid 150k CIT in 2010 and after this year I have no more earning in my company. In 2015 I want to pay myself a dividend of 350k. Do I still have this franking credits from 2010?

Yes

Another question:
I have 1% of stake of company XXX which paid 5kk CIT and pay no dividend.
I have 100% of company YYY which paid 150k CIT and pay me 350k dividend.
Do I need to pay 48k PIT or can I use franking credits from XXX company ?

The franking credits belong to the company until they pay a dividend at which point they are transferred to you on payment of a dividend. So, no is the answer.

 

[VSntchr]

You need to speak to an accountant.

This.
If your actually making the kind of money your referring to in this thread, then spending a few $k on a good accountant is going to be well worth it. It's not exactly costly from a business perspective when your looking at <1 or 2% of a years profits to get it all sorted. ASF is a good place to start to get basic info, but when taxation questions get complicated and it's going to be affecting your financial outcome in the order of 10's of thousands - it's clearly time to seek professional help.

FWIW tho, McLovin knows his stuff in this area from what I've seen

 

[satriani1]

cropcos, So_Cynical, McLovin, VSntchr - Thanks

As I said - It doesn't look good. I heard that ATO is very agressive and have strong CFC law, so offshore company probably wouldn't be a good idea.

Do you know how it look like in mutual funds/hedge funds? In many developed countries you won't avoid tax, but you can deferred taxes thanks to some kinds of funds.

How do the private equity and venture capital companies work in AU? As a normal company? Or there is some special legal form for them? How about taxes?

 

[blaze182]

Mofra- the costs involved are substantial, but only if you lose. The repercussions for the Australian Government are huge. No more CGT on any investments that involve risk, even property wouldnt be taxable as there is no guarantee that your "investment" will go up, this has been shown recently. The only real investments that would attract tax are term deposits, however even this is subject to review as in the 1936 Tax Act, interest is not considered income unless you are in the business of lending money. The ATO twists that section to now say that it is "passive income". But it is in black and white in the '36 Act ( the '97 Act being a virtual copy) that interest doesnt form the taxpayers income...

The above arguement doesnt even touch on what the "rules" of taxation state,ie. that receipts to be declared income must come under the definition of ordinary concepts.. Ive got case law that blows that arguement out of the water...

I think you need to see an accountant, the law is very clear on the approaches taken to investment, trading and gambling, and it provides a very broad definition to help you identify. You will find, if you are a real trader or investor, you are subject to tax - period. If you take advice from the bartender, you'll be fine.

cropcos, So_Cynical, McLovin, VSntchr - Thanks

As I said - It doesn't look good. I heard that ATO is very agressive and have strong CFC law, so offshore company probably wouldn't be a good idea.

Do you know how it look like in mutual funds/hedge funds? In many developed countries you won't avoid tax, but you can deferred taxes thanks to some kinds of funds.

How do the private equity and venture capital companies work in AU? As a normal company? Or there is some special legal form for them? How about taxes?

Seek an accountant, there's a lot of ways to mitigate tax through intelligent setup and preparation.