Discretionary Trusts are great for Young Families in Business as they give you… you guessed it, DISCRETION.
In fact they’re more well known as Family Trusts.
They give you discretion about who pays tax, how much they pay and potentially when it’s paid.
So let’s combine the power of discretionary trusts with the fact the you have a bunch of little ones running around the house!
The example we’ll use is where your taxable income is $200,000.
Remember all those dirty nappies, sleepless nights & Saturday morning sports events?
Well the ATO is about to reward you for being a busy parent juggling a family and a business!
The tax rate in your own name would be at individual rates, of up to 47%.
So you’d be up for $67,547 Tax.
Let’s say we you have 3 little ones under 18...
What do you need to implement this strategy?
Many years ago, this used to be a few thousand dollars for each child.
The ATO has reduced the limit over the years, and it now sits at $416 per child.
In most cases, yes - which (depending on their circumstances) massively increases the tax savings! #FistPump
Nice try… but no.
They have to be born before 30 June to count.
Most trust deeds will allow this if you’re married or in a de facto relationship with their mother or father.
Yes - so long as they legally your children.
The fact that you’re already supporting them more than $416 in the year, means that you have already given the money to them (or paid for expenses on their behalf worth more than $416).
So you don’t need to give them $416 in pocket money! Phew!...
Yes, that’s right.
Tax free income of $6,240. (A saving of $2,933 in the example above!)
For every dollar in tax we save a small business, we give a family in need a days worth of access to life changing help. Here are some of the impacts -