Case Study | Small Business Saves $8,108 Tax

Objectives:

Peter is a small business owner who wants to save tax and reduce his child maintenance payments.

Facts: 

• Peter’s business has a taxable income of $77,000 and is growing (taxable income is expected to double next year).
• Peter is divorced and pays child support of $12,000 per year.

Accountant’s Advice: 

• Tax Strategy 2: Home office occupancy costs – business operated from home (seeing clients, administration, etc.).
• Tax Strategy 105: Rollover from sole trader to company – Move to company structure for asset protection purposes and to take advantage of the 27.5% company tax rate.
• Tax Strategy 123: General pool balance less than $30,000 – Write-off the $30,000 general pool balance.Tax Strategy 161 – Gift to clients.

Results

• Peter saves $8,108 tax (taxable income reduced by $23,501).
• Child support payments are reduced by $6,000 pa.
• Accountant receives tax planning fees of $1,700 (20% of the tax saved).