Page 197 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes We worked with Brian and Emma in devising a financial model that provided the Guardian

to the children with access to funds on a regular basis and on a specific needs basis.
Personal Tax Planning
We provided Brian with a detailed breakdown of the level of tax he is currently paying and

how we can reduce this significantly through tax planning and restructuring.
Outcome
As a result of the Opes Wealth Trust planning exercise, Brian and Emma now have a

very focused and tax-effi cient financial plan in place that is appropriate to their specifi c
circumstances. We have helped Brian establish a new company from which he now
provides his services. This new corporate structure will enable Brian to accumulate wealth
much more efficiently going forward. They also have the peace of mind that comes with

knowing that, in the unfortunate event of something happening either of them, they have a
tax-efficient and up-to-date estate plan that deals with how their children are looked after

and ensures that their final wishes for their estate are adhered to.
Benefits to Operating in a Company Structure:

1. Limited Liability: This provides a safeguard for individuals against their personal
assets.
2. Tax Effi ciency: A company can be a very tax efficient structure, both for transacting

business and also through creating wealth in a personal capacity for the directors and

employees through retirement planning. One of the major benefits of incorporation

is access to the lower tax rates that apply to a company’s profits, as well as it being
more economical to build up working capital in a company rather than as a sole
trader.
3. Corporate Identity: A company is a separate entity with its own sense of image,
stability, sophistication and credibility.
4. Raising Equity/Capital: A company provides individuals with the ability to raise
equity by selling its own shares to potential investors. This is on top of traditional

sources of finance such as loans which require interest to be paid.
5. Continuous Life: A company can survive its founders. It also provides some
additional comfort in the area of permanence of the business activity.
6. Flexibility: A company’s shares can be transferred, pledged, sold, given away, used
as security, or given as bonuses.
7. Alignment of key individuals with success of the business: A company can align key
individuals to the longer term success of the business. Increasing salaries or paying
bonuses can provide incentives for short term performance, whereas stock options
align the individual in the longer term.

8. Cash Extraction: The process of incorporation itself, for an existing business, can be
used as a tool to allow the sole trader to extract capital value from the business in a
tax-efficient manner as a part of the transfer of the business to the new company.

9. Succession Planning: Generally speaking, a company will be a more attractive business
prospect to either a potential purchaser in the future or to transferring ownership of
the business to the children. Not only will the stamp duty cost be reduced with the
company structure but the business owner may also be in a position to extract profi ts
in a tax-efficient manner before the disposal, thus reducing the overall tax cost to

both the seller and the purchaser.
Contd...

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