Tax Planning Australia: Part 2 - Choosing The Right Structure To Build And Retain
- Future Accounting
- 17 hours ago
- 3 min read
Written by: Melissa Cunliffe
This is Part 2 of our tax planning series, where we explore the key things to consider before 30 June.
In our first article, we explored the importance of preparing early for tax planning in Australia. In Part 2, we focus on one of the most important drivers of effective tax planning in Australia—choosing the right structure to build and retain wealth.
A common goal of tax planning in Australia is simple—pay less tax and retain more wealth. But focusing solely on tax minimisation can lead to short-sighted decisions.
Tax is only part of the equation
The real question is: are you structured in a way that supports both your current position and your future goals?
The right structure should balance:
Tax efficiency
Asset protection
Flexibility
Long-term wealth creation
Are you structured for the future?
Your structure should not only suit where you are today—it should also anticipate where you’re heading.
With ongoing discussions around potential capital gains tax (CGT) reforms, we are seeing a shift in how investment structures are being considered.
Traditionally, unless someone was a high-income earner, investment assets were often held personally or through a trust. This approach provided access to the 50% CGT discount, greater liquidity, and flexibility in distributing income.
Why companies are becoming more attractive
As tax planning in Australia evolves, companies are increasingly being considered as a viable structure for holding investment assets.
Companies cap tax at 30% on investment income. If CGT discounts are reduced or removed, the benefit of holding assets personally or in a trust may diminish.
For many, the tax savings within a company structure may outweigh any future CGT discount, while also allowing profits to be retained for future investment.
But structure comes with trade-offs
While companies can offer tax advantages, they also come with important considerations.
A company is a separate legal entity, which means funds held within the company are not yours personally. Accessing those funds for personal use generally requires a dividend to be declared, which may trigger additional tax.
This is why careful planning is essential—your structure must support both your tax position and your cash flow needs.
Trusts and choosing the right structure: flexibility with responsibility
If you operate through a trust—whether for business or investments—each year the taxable net income must be distributed to beneficiaries.
There are strict legal requirements that must be completed before 30 June. Failure to meet these requirements can result in unintended tax consequences.
We’ll explore trust distributions in more detail in Part 3 of this series.
Sole trader or partnership: is it still the right fit?
Many businesses start as sole traders or partnerships due to simplicity and cost-effectiveness.
However, as your business grows, your structure should evolve. Consider whether your current structure provides asset protection and remains tax effective.
This is particularly important if your business net profit or total taxable income exceeds $190,000 per year, where marginal tax rates increase significantly.
The value of getting your structure right
Choosing the right business or investment structure in Australia can significantly impact your ability to retain wealth, manage risk, and plan for the future.
The right structure can improve tax efficiency, protect your assets, and provide flexibility as your circumstances change.
Take action before 30 June
Structure changes and planning opportunities often take time to implement properly.
If you’re reviewing your tax planning in Australia, now is the time to ensure your structure is right.
Book your tax planning appointment with our team today and ensure your structure is working for you—not against you—before the 30 June EOFY deadline.
Next Article: Tax Planning Australia: Part 3 - Trust Distributions And Getting It Right Before 30 June
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
