Tax Savings Strategy 206 | Private Investment Companies

Tax Savings Strategy 206 | Private Investment Companies

private investment company

The benefits of using a private company to accumulate investments include:

  • Company tax rate of 27.5% (which will eventually reduce to 25% by 2025).
  • Ability to retain profits after tax (important in the lead-up to retirement when individual taxable incomes can be high).
  • Fully franked dividends can be accumulated tax free due to the dividend imputation system.
  • Borrowing with banks is much more-simple and straight forward than through a trust structure.
  • Once the individual taxpayers are retired (and in receipt of tax free superannuation benefits) the profits can be distributed as dividends. Two retired spouses could take out a franked dividend of $96,180 each per year and pay no additional tax due to the attached franking credits of $41,220.
  • Can contribute additional investment funds to the company at any time.
  • Can access cash from the investment company at any time (through director’s loans, share buy backs, or dividends).
  • Companies have perpetual succession (so useful for estate planning purposes).
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