Asset protection as long as the trust is run by a trustee company it's quite similar. However, we tend use a mixture of a trust and a bucket company as you can see from the video. This way you get the benefits of trust and companies.
Hi Davie, I’ve been bingeing on all of your videos. Super helpful info - thanks! I have questions about the above content: 1. What happens when the funds are paid from the bucket company to shareholders? Is there more tax to be paid? 2. Also, what’s the difference between a holding company and a bucket company? Thanks!!
its taxed at the shareholder tax rate however there is a franking tax credit. There could be more tax or tax refund just depends on the individual or shareholders tax. Eg. if the individual is on the highest tax rate then yes they will have to pay a top up tax of 19% (45% - 26%). not much of a difference except for how it is structured. The holding company owns the shares in the trading and investment companies whereas a bucket company is a beneficiary of the trust.
Thanks so much for getting back to me!!! That’s super helpful. I have another, haha 😅 Wait, wait. What happens if the shareholder is individually taxed at a low tax rate (ie, earning under $18k)? Do the franking credits apply then, meaning the shareholder gets refunded tax that was paid by the bucket company?? Cause that would be WILD! Also, I’m not able to get a straight answer to this questions: Does a holding company need an ABN AND an ACN? Thanks again!!
@@OT-hm4ve yes correct the shareholder does get the refund if their tax rate is lower. The get a tax credit for the tax paid by the company which could be 26 or 30%. But the profit paid out from the company aka dividends gets added to the shareholders income. They just need to go over 45k taxable income and they will have a tax rate of 32.5%. ACN,all companies will have. ABN is only if the company runs a business. However us accountants just get the abn registered anyway for bucket companies and holding companies.
That’s wild! Good to know I see. Thank you for clearing that up. I have just one more. What’s the difference between an “ultimate holding company” and a holding company? Is it just fancy wording? Oh, and do you have a video that talks about companies owning property? I’ve seen your videos: - “Purchasing a Car Under a Business” - “Investment Property Tax Tips Aus” - “Achieving CGT Property Exemption in Aus” ... But I wasn’t able to find what I was looking for - crash course/high-level info on the subject. It’s super cool that you’re actually answering my questions, haha. Thank you for your time. I really appreciate it Davie!!
@@OT-hm4ve Just a fancy word but it really means the last holding company. There maybe a few levels of ownership. Doesnt happen often for small businesses. Unfortunately not yet. Maybe one day :) No problem :)
To keep things simple, is it possible for the holding company to sit directly on top of the trading company and do away with family trust? And keep trading company's profits away from creditors. If the shareholder needs money, he/she can distributes a dividend and franking credits from the holding company. Ps. Great video, thank you
I just want to confirm: does the company get taxed (at about 25-30% of the profit)? If it gets taxed, when it distributes dividends, do individuals get taxed again according to their income threshold? That would be double taxation, wouldn't it? Are there any examples of businesses that should use this method? If it is double taxation, I can still see some benefits. The dividends have to be distributed to more than one owner and over a period of years. Additionally, the business profit can be reinvested back into the business instead of being taken as personal income. I believe this method is only for commercial business use and not related to investments such as stocks, forex, or cryptos, correct? because family trust can give 50% of tax discount after holding more than a year. How much is the annual maintenance fee after setting up a trust versus a company? What type of accountant should I ask for the best business structure and tax tips? How much do they charge normally for their advice?
Wow - Very interesting. Only companies that earn a high amount of yearly earnings do this. Or do you see sole traders doing this sort of thing as well?
great video, so the bucket company is only in a Trust strtucture ? what about if you had a company structure for your business , can you still have a separate bucket company ? thank you
Yes you can, technically you can lend money from company to company or pay dividends to a holding company which then becomes the bucket company too. Best to chat to an accountant and get detailed advice that is specific to your circumstance.
how come bucket company doesnt have to pay taxes on the income (profits from the trading company) since its a different entity would not have expenses to justify it not paying taxes. Its balance would only show income and no expenses. Thanks!
Ok, so a bucket company holds the after-company tax profit - cash, but taking it out of the bucket company and putting it into your personal pocket will still attract the same high personal income tax bracket problems. I don't see how this has any benefits other than protecting the cash from creditors, i.e short-term business wanting to leave their creditors such as Contractors unpaid, can't see any benefit here and makes it needlessly more complex.
If you buy an investment property using a bucket company, you don’t have to pay back the money to the bucket company for the length of the loan? And does the bucket company technically own the property? And if you decide to live in the property, you can pay rent to the bucket company? Sorry for all the questions. 😊
How does it differ from a Trust, I mean in terms of assets protection?
Asset protection as long as the trust is run by a trustee company it's quite similar. However, we tend use a mixture of a trust and a bucket company as you can see from the video. This way you get the benefits of trust and companies.
Hi Davie,
I’ve been bingeing on all of your videos. Super helpful info - thanks!
I have questions about the above content:
1. What happens when the funds are paid from the bucket company to shareholders? Is there more tax to be paid?
2. Also, what’s the difference between a holding company and a bucket company?
Thanks!!
its taxed at the shareholder tax rate however there is a franking tax credit. There could be more tax or tax refund just depends on the individual or shareholders tax. Eg. if the individual is on the highest tax rate then yes they will have to pay a top up tax of 19% (45% - 26%).
not much of a difference except for how it is structured. The holding company owns the shares in the trading and investment companies whereas a bucket company is a beneficiary of the trust.
Thanks so much for getting back to me!!!
That’s super helpful. I have another, haha 😅
Wait, wait. What happens if the shareholder is individually taxed at a low tax rate (ie, earning under $18k)? Do the franking credits apply then, meaning the shareholder gets refunded tax that was paid by the bucket company?? Cause that would be WILD!
Also, I’m not able to get a straight answer to this questions:
Does a holding company need an ABN AND an ACN?
Thanks again!!
@@OT-hm4ve yes correct the shareholder does get the refund if their tax rate is lower. The get a tax credit for the tax paid by the company which could be 26 or 30%. But the profit paid out from the company aka dividends gets added to the shareholders income. They just need to go over 45k taxable income and they will have a tax rate of 32.5%.
ACN,all companies will have. ABN is only if the company runs a business. However us accountants just get the abn registered anyway for bucket companies and holding companies.
That’s wild! Good to know
I see. Thank you for clearing that up.
I have just one more. What’s the difference between an “ultimate holding company” and a holding company? Is it just fancy wording?
Oh, and do you have a video that talks about companies owning property? I’ve seen your videos:
- “Purchasing a Car Under a Business”
- “Investment Property Tax Tips Aus”
- “Achieving CGT Property Exemption in Aus”
... But I wasn’t able to find what I was looking for - crash course/high-level info on the subject.
It’s super cool that you’re actually answering my questions, haha.
Thank you for your time. I really appreciate it Davie!!
@@OT-hm4ve Just a fancy word but it really means the last holding company. There maybe a few levels of ownership. Doesnt happen often for small businesses. Unfortunately not yet. Maybe one day :) No problem :)
To keep things simple, is it possible for the holding company to sit directly on top of the trading company and do away with family trust? And keep trading company's profits away from creditors.
If the shareholder needs money, he/she can distributes a dividend and franking credits from the holding company.
Ps. Great video, thank you
I just want to confirm: does the company get taxed (at about 25-30% of the profit)? If it gets taxed, when it distributes dividends, do individuals get taxed again according to their income threshold? That would be double taxation, wouldn't it?
Are there any examples of businesses that should use this method?
If it is double taxation, I can still see some benefits. The dividends have to be distributed to more than one owner and over a period of years. Additionally, the business profit can be reinvested back into the business instead of being taken as personal income.
I believe this method is only for commercial business use and not related to investments such as stocks, forex, or cryptos, correct? because family trust can give 50% of tax discount after holding more than a year.
How much is the annual maintenance fee after setting up a trust versus a company?
What type of accountant should I ask for the best business structure and tax tips? How much do they charge normally for their advice?
Wow - Very interesting. Only companies that earn a high amount of yearly earnings do this. Or do you see sole traders doing this sort of thing as well?
You are legend! Very good content
Thanks for watching !
great video, so the bucket company is only in a Trust strtucture ? what about if you had a company structure for your business , can you still have a separate bucket company ? thank you
Yes you can, technically you can lend money from company to company or pay dividends to a holding company which then becomes the bucket company too. Best to chat to an accountant and get detailed advice that is specific to your circumstance.
how come bucket company doesnt have to pay taxes on the income (profits from the trading company) since its a different entity would not have expenses to justify it not paying taxes. Its balance would only show income and no expenses. Thanks!
How does capital gain compare between trust vs Bucket company?
Great content. What if someone went after the bucket company?
There could be cases that happens but generally the bucket company doesnt do anything risky so its quite low risk for it to be targeted.
Thanku. Very good.
Most welcome
Ok, so a bucket company holds the after-company tax profit - cash, but taking it out of the bucket company and putting it into your personal pocket will still attract the same high personal income tax bracket problems. I don't see how this has any benefits other than protecting the cash from creditors, i.e short-term business wanting to leave their creditors such as Contractors unpaid, can't see any benefit here and makes it needlessly more complex.
If you buy an investment property using a bucket company, you don’t have to pay back the money to the bucket company for the length of the loan?
And does the bucket company technically own the property? And if you decide to live in the property, you can pay rent to the bucket company?
Sorry for all the questions. 😊
Did you get a reply to these questions? They are great questions btw.
Is trading company trustee?
you can do this but we normally don't advise this as it can be risky.
I do this so I only pay 30% taxes. Beats paying 50%