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Maximising business profits to put towards PPOR debt

Discussion in 'Accounting & Tax' started by golazo, 20th Sep, 2015.

  1. golazo

    golazo Member

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    Another tax question for all the accounting wizards out there on PC. Thought I'd put it out the the PC community as I may be heading into a new business venture. The hypothetical scenario is as follows:
    • For a given financial year, the business has made profit of $100,000
    • The business can be set up in any way shape or form e.g. company, trust, sole trader etc. (Anything except not for profit organisations of course :))
    • MV of PPOR = $500,000
    • Loan amount = $400,000 (80%)
    • Offset amount = $300,000
    • Remaining PPOR debt to pay off = $100,000
    My question is, how can I get the $100k profit the business has made, to my personal name with the maximum tax minimisation possible to have my $100k PPOR non deductible debt completely paid off? Options have been many including dividends, salary, trust distributions, loaning to the company or take a loan from the company among many others. Asset protection is not a priority here, purely minimising tax as much as possible.

    Probably not so much property related as it is business related however am potentially considering venturing into a new business so just wanted to get a bit of background before I catch up with an accountant. Any help/insight would be much appreciated.

    Thank you.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Structure makes a huge difference. If a trust you could distribute to a non working family members who could pay little or no tax and gift it to you.
     
  3. Bayview

    Bayview Well-Known Member

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    I employ myself, but I am a lazy bludger who does bugger-all all day except watch the clock and waste time on this site, so can I distribute to myself (non-working) and then redistribute to myself? :p
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Distributions from a trust are taxable
     
  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    You could use a variety of strategies. One common one is that the Director borrows the $100K from the company. Credits to his offset account. Just before company tax return is lodged the loan is repaid. This strategy allows cash profits to be invested to benefit owner without a $100K dividend also adding a tax problem.

    Repeat often.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Paul

    I think that would be a deemed dividend after the first time. I can't remember why, but think this is only possible once.
     
  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    This is what we've been advised to do for years now.
     
  8. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Terry_w likes this.
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is covered in the book Division 7A Handbook, at 5-215