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Why Use A Bucket Company?
Assume a trust earns $250,000 in profits from business or investment.
OPTION 1. Distribute profits 50/50 to individuals 1 and 2 ( inc Medicare Levy payable) = $70698 (28.28%)
OPTION 2. Distribute $90,000 each to individuals 1 & 2 and distribute balance of $70,000 to a “bucket” company at a 30% tax rate . Total tax payable = $61,874 ( 24.75%)
Value of strategy is $8,824 in tax saved!
“Bucket”
Company
$70,000 Income from Trust
taxed at lower rates of
30% or 27.5%
Uses Cash to:
- Invest in shares, properties and loan funds to other companies
- Should never operate a business or engage in risky activities.
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Disclaimer
We have provided this document as a fundamental guide that is intended to assist people in improving their understanding of the tax laws and how they operate. When considering what actions to take, however, more factors should be considered.
This is not intended to be a comprehensive document that can be taken as tax advice, financial advice, or any other kind of advice. The content does not consider any of your circumstances and is only generic in nature.
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