How one business reduced tax while also boosting profits
This business came to us in the shape that many do: it had been established with just one shareholder owning a minimal amount of shares. Unfortunately, this did not give the business owner any immediate ability for tax planning, and little opportunity for any Capital Gains Tax planning in the future, should the business be sold.
A simple share structure reorganisation resolved this issue. We were then able to share business profits amongst all the family members, utilising their individual tax-free thresholds. By accessing the business franking credits, we produced excellent tax refunds for the individuals involved, reversing the trend of annually paying extra tax to the taxman.
At the same time we restructured the business owner’s salary, to produce savings of both workers compensation and payroll tax, and putting more money each week in his hands. While all this restructuring was going on, we worked with the business owner to set the profit that the business should achieve for the year. As a business owner, the profit you make is your return on investment after you have paid yourself a market wage. Once this profit plan was set, we monitored the business every month to make sure the profit plan was achieved (and guess what, he smashed it!).
Now we'd love to share with you the actual value to the business owner and his family of all these changes, but he won’t let us! Rest assured, he was delighted with the subtle changes made to his business structure.