Income tax is a critical factor when considering the most appropriate structure. This predominantly comes about because varying tax rates apply to various structure types as listed below as an example
- Australian resident Individuals pay tax on a marginal tax scale and have a tax-free threshold.
- Non-resident individuals also pay tax on a marginal tax scale but as a general rule do not get a tax-free threshold.
- Regulated superannuation funds which are in accumulation phase pay a flat rate of tax of 15% on their earnings and concessional contributions.
- Regulated superannuation funds which are in pension phase do not pay any income tax on their earnings but are still subject to income tax at the flat rate of 15% on concessional contributions received by the fund.
- Regulated superannuation funds which are either in pension phase or accumulation phase do not pay any income tax on non-concessional contributions received by the fund.
- Companies pay a flat rate of tax of 30% and do not get a tax-free threshold.
- Trusts are not liable to income tax in their own right unless they determine not to distribute the income to the respective beneficiaries or unit holders. In which case the trust will be liable to income tax at a flat rate, being at the highest marginal rate of an individual taxpayer. If the trust does determine to distribute its income the taxing point will be in the hands of the unit holders at the unit holders or beneficiaries applicable tax rate, depending upon whether the unit holder is an individual, company, trust or SMSF.
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