Using a bucket company to buy shares?

Following on from a previous post I made about using our bucket company funds for something, I have another question.

If we use the bucket company to buy shares, the company owns the shares and receives any income and capital gain from them, but how are they taxed in a capital gain event?

I understand there’s no CGT discount for companies? Is that on the sale of a company, or also on any capital gain on an action within a company?

Let’s say the company buys a bunch of high yielding shares for long term and a bunch of low yield capital growth shares.

I assume the company would pay company tax annually on any dividend income at the prevailing company tax rate?

Let’s say after a couple of years a few sticks have made a bumper gain so they get sold. How is the gain taxed?

Say a stock is bought for $10k and sold for $20k making a gross $10k profit, is that profit then just added to the companies income for the year and taxed at the company tax rate? I’m still not all over Franking, so say we draw down some funds from the bucket in a subsequent low income year, we’d pay top up tax (or receive a tax refund) depending on our incomes at the time?

If my understanding is correct, although a 50% CGT wouldn’t be applicable within the company on the gain in the sale, it may still be beneficial to hold shares in the bucket due to being taxed at company rates instead of personal rates until drawings are taken?

Or have I got that completely wrong?

Cheers.

 

better off setup corporate trustee for family trust and buy shares, all dividend can be ditched out to 18 years old kids at school and she get the franking credits and all that

 

Yeah, but I’ve already got the bucket and it’s filling up so looking at ways to use the buckets money rather than it sit there getting 0.0000001% interest.

 

Yes and adjusted for franking credits.

Yes

Yes

Yes - it may. It may not as well.

 

Depending on the sums it might be better to lend to a relat d trust.
Also didn't you say shares of the bucket company are held by individuals? If so this would limit ability to get funds out of company later

 

can you get a bigger bucket ?

 

Yes, shares are personally by us.

 

Like equal number of ordinary shares by both of you? Then dividends have to paid out equally as well.

Any other share classes?

 

I’d have to check the set up again, I’m sure the accountants said the way it was set up with the class of share meant that it could be adjusted in whatever split we’d need come the time to take any drawings. Does that sound right?

 

Yes possible but tax comsequences

 

Be aware of dividend stripping arrangements if you change shareholdings or issue dividend access shares later on

 

Prob best to start a new bucket company, structure it well, and slowly deplete the old one.

 

What would be the main difference though? If we just kept it as is, bought shares, paid the relevant taxes each year within the company and took dividends from the bucket in the future as 50/50 share and didn’t fluff around chopping and changing ratios each, would that cause any major dramas.

I’ll be seeing the account soon so will run it all
passed them too.

 

Any chance you would want anyone else to benefit?
Any kids or grandkids?

Any chance you and spouse could have different incomes some years?

 

We’d probably have different incomes at some point but not hugely, and we’d look to wind back work at a similar time. Can’t say 100% obviously as who knows what the future holds, but based on the last 25 years we’ve bothered earned about the same.

We have no kids, none coming. Plan is to blow the lot before we peg it anything left will be a bonus and the nieces and nephews (all overseas) can fight over the scraps.

 

In that case perhaps it may not be an issue.
If one of you died is there a discretionary trust set up in the will? Without one there could be some adverse tax issues if you are non-residents at the time of death for example.

 

Ahh yes, the Will, about that.... really must get around to malign one!

I think we’ll go see our solicitor in the next week or two and get that sorted, need to have a head scratch about my business if I pass, makes it complicated having a business partner too.

 

Unit holders or shareholders buy/sell agreements in place i trust with an indication of the valuation methodology.

 

It’s a bit of a unique business @Mike A as in my business partner and I are also on the tools, we carry no debt and there’s not much in the way of assets. Either one of us could walk at any time and the other would be fine. Most of our profits come off the back of the 4 staff, any of who could leave at any time or take allegiance with either of us if we decided to split say. The main question is whether my partner (personal partner that is) would want the potential Liability aspect to worry about. It’s a relatively high risk business area and out of the two of us I’m the business brain part. Lots to think about.

 

what happens when one of the partner's dies?