Income Tax: Saving tax through correct structuring

How Sullivan Dewing arranged for a tax refund of more than $8,000.

The Challenge

Margaret came to us for what Sullivan Dewing calls the annual 'grease and oil check'. We were able to confidently estimate the financial performance of her company prior to year-end. We challenged ourselves to put Margaret through our thorough review process to see if we could save her any tax.


Although we act for Margaret, her husband has his own accountant. We learned that he had begun drawing a complying pension from 1 July of that year, and was expected to have a taxable income of less than $1,000. We knew Margaret's taxable income would, in fact, be a net loss (due to negative gearing) of $17,000.


Our Actions

Our recommendation to Margaret was for her company to declare a fully franked dividend of $47,000. This was credited 50/50 between husband and wife.


Results

This strategy allowed Margaret to draw upon a $47,000 credit loan account which could be accessed tax free. Furthermore, Margaret’s husband received a tax refund cheque at the end of the year for more than $4,000. Margaret received a tax refund cheque at the end of the year for more than $8,000, resulting in another delighted client for the team at Sullivan Dewing.

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