Could a bucket company help reduce your tax obligations?

Using a bucket company can provide an opportunity to minimise your tax obligations if you operate through a trust structure. A bucket company is a company that sits below your trust as a beneficiary and allows you to cap your tax payable at a corporate tax rate.

Excess profits left over following distribution to family group members can be paid into a bucket company, where those profits will be taxed at the corporate rate of 26% (reducing to 25% in 2021-2022).

This is particularly useful if distributing excess profits to family group members will push them into a higher tax bracket. Rather than paying up to 45% at the highest rate of personal income tax, you could save thousands simply by distributing additional profits into a bucket company, after you’ve distributed sufficient amounts to your family group members.

There are of course important considerations for meeting tax obligations, and these need to be discussed as part of your tax planning strategy. To find out more about appropriate structures for your situation, please speak to a member of our team on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au or elias@roskant.com.au.