We had a new client who was receiving distributions from their business of around $1 million each year into a discretionary trust.

In prior years they had done no tax planning and had been splitting the income between them. this resulted in them paying approximately $230,000 tax each per year.

Strategy

After reviewing their position for the current year which had a similar business income we were able to reduce their tax significantly by:

1. Implementing a corporate beneficiary structure and preparing a schedule to manage their Division 7A requirements/ repayments each year.
2. Helping them to understand their superannuation caps – with their financial planner advising them to maximise their contributions.
3. Bringing forward some planned capital purchases in the business which minimised the distribution for the year.
4. Advised them to obtain a quantity surveyors report for their rental property which allowed a considerable deduction for depreciation on their building.

Benefits

After implementing each of our recommendations they saved $140,000 each in tax in the first year.

The combined tax savings for that year and the following years would allow them to pay off their home loan 7 years earlier than they had originally planned.