company Archives - Pinnacle Accounting Advisory

In this blog we will cover three very important things your accountant could be doing now to save you money and help you grow your business.

Firstly, we’ll cover the importance of tax planning. Then, we will discuss how business strategy can grow your business. Lastly, we will delve into the importance of having a trusted network of professionals to help you on your business journey.

Tax Planning with your small business accountant

Different tax plans can have different consequences. This is why working with a Chartered Tax Advisor will ensure you are winning.

Small business accountants understand how to use different trading structures. Because of this, they will ask you questions to check what is best for you and then make a suitable recommendation.

Further, the accountant will also have a strong understanding of the different tax rates which apply to trading entities and explain this to you based on your unique needs and situation.

In other words, this process, known as Tax planning, can save you a great deal of money by applying legal avenues to save you tax and allow you to reinvest these funds into the business.

Because of these savings, you can reinvest the money into the business through advertising or the purchase of manufacturing plant. As a corollary, business revenue will grow and so will the business profit.

Because we are Chartered Tax Advisors, we have cutting edge tax and business knowledge.

As a result, we are able to save you money on tax and help you grow the business. Why wait, call us today for a confidential, obligation free initial chat.

Business Strategy with your small business accountant

Having the right strategy can be the difference between a successful business and a business that is barely surviving.

A CPA has very good commercial understanding of the market.

This understanding of the market can be broken down into the following 7 key areas which the accountant can assist you with:

Establishing your why
Market Analysis
S.W.O.T Analysis
Marketing Plan
Unique Selling Proposition
Best trading Structure
Connecting you with other professionals

Trusted Network

Your small business accountant works with many professionals. Therefore, they can connect you with the following:

Commercial Lawyers
Family Lawyers
Marketing people
Conveyancers
Financial planners
Auditors
Finance Brokers
Mortgage Brokers

Above all, they are able to connect you with the right professional for your unique needs and personality type.

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The tax rates for an entity in Australia will be different depending on the type of entity used.

We will go over the rates for the most often used structures.

Entities

We will review the following 7 entities:

Individual
Partnership
Company
Discretionary or family Trust
Unit Trust
Self Manager Superannuation Fund (SMSF)
Joint Venture

Individual tax rates

Individual rates tend to be different each year. For the 2021 financial year, the rates were:

These may also need to be paid:

Medicare Levy (ML); and
Medicare Levy Surcharge (MLS)

The Medicare Levy rate is 2%

See the table below for the MLS rate:

The thresholds above increase by $1,500. This is to say, for each dependent child after your first kid.

Click here to check the historical individual rates.

Click here to check the historical MLS rates.

Partnerships

A partnership needs to complete a tax return. With that said, the partnership does not itself pay tax. In addition, the partners pay tax if applicable. In other words, if the partner is an individual then they will pay tax. Whereas, if the partner is a trust then the trustee or the beneficiary of that trust is likely to pay the tax.

Company Tax Rates

The company is the most used business entity.

As a result, the rate for a trading company, which is a based rate entity, in the 2022 financial year is 25%. However, if the company is not trading and is not a base rate entity, then the rate is generally 30%.

Subsequently, To learn more about establishing a business click here.

Also, you can check the company rates now by going to the ATO website which speaks more about Changes to company rates.

Discretionary Trust/Family Trust

This entity is not taxed if the beneficiaries are entitled to all the income of the trust. Consequently, If this is not the case, the trustee will be taxed at the highest individual marginal rates.

In addition, the trustee will pay the MLS.

Unit Trust

The ATO does not assess this type of entity. Therefore, unit holders may have to pay tax depending on the type of entity they are. That is to say, the unit holder may be a discretionary trust with one individual beneficiary. As a result, the individual beneficiary will be taxed but not the discretionary trust.

Likewise, a partnership unit holder will not pay tax either but the partner’s will pay tax if they are a company, self managed superannuation fund or individual.

Self Managed Superannuation Fund/SMSF Tax Rates

An SMSF pays tax at 15%. For this to happen, it must be a complying fund.

Further, a complying fund receives a capital gains discount of one third when it holds property for at least 12 months. This amount is then added to the assessable income on which it pays 15% income tax.

Joint Venture

The tax authorities don’t tax joint ventures. Further, members must avoid receiving income jointly for this to take place. For example, receiving income jointly is raising an invoice as the joint venture.

Speak with us now

Understanding various tax rates and how the array of entities work together to reduce tax is complex.

Contact us if you require assistance. We offer you a free initial discovery session to see how we can support your big vision.