Small business 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).