Super as a Business Deduction. Please Help

pascher on 04/01/2017 - 15:01

Hello brainstrust,

Just got a question for those of you out there that have maybe have a small business and pay super out of - in addition to compolsory contributions. I note this is a very much a first world problem, and not one which is likely to affect many people, but is somewhat hypothetical and rounded in nature of figures for ease of understanding.

Looking through online materials, ato, asic, and also money smart small business basics etc, there is not a clear indication as to how concessional contributions affect the profit of a business.

https://www.ato.gov.au/super/self-managed-super-funds/contri…

Scenario:

90k profitable business.

Looking to reduce this cash profit by distributing this as a concessional contribution to 3 employees.

3x30k=90.

Therefore 0 profit now for the company.

My understanding is that this money can be paid directly to the complying fund of the individuals, however attracts a 15% tax on deposit… ie, each only receiving 25,500 into their accounts?

But on closer scrutiny with some people at my work that have small business interests, they say there may be a liability for fringe benefit tax…??

I do not see how this would be correct except for double account keeping, of paying the amount - 30k to each individual - who then would make the contribution on their own behalf, and claim the concession.

If anyone can shed some light to the relevant online documentation and area applicable in taxation or superannuation law, I would be thankful…

These loopholes are about to be greatly reduced, and as some family members are nearing retirement and being female were not in the workforce to receive the entitlements of super as we know it today, please be mindful that I am not trying to rip off the guvrnmint but just be fair and diligent to those elders where I can using my knowledge.

Many thanks.

Financial

Comments

  • [Deactivated] on 04/01/2017 - 15:18
    -2

    Ask the ATO if you have questions
    I am not sure why posing your question to an internet forum is going to give you actual proper answers
    the governing body is the ATO, asking them will provide you with the actual help you need

    Just as a FYI

    • Diji1 on 04/01/2017 - 18:18
      +1

      That's about as silly as asking Centrelink how to structure your retirement. Even if they wanted by law they are are not allowed to give you the best answer.

      • pascher on 05/01/2017 - 13:49

        Unfortunately this is the conflicting information I have been provided by ASIC in the past, where they are only allowed to refer you to the legislation, and not even allowed to base an interpretation of it, even when it conflicts what they have in other areas of the FAQ.

        The FAQ section is not a legally binding decision, and you are held accountable to the relevant and "current" legislation, usually deemed uncontrolled when downloaded or printed…

        I believe there are a lot of people out there that could or may want to help, and I have given help to a lot of my friends and family in structuring and understanding of the intrigues of our weird tax and establishment of security registration in Australia.

        Hopefully there are some other people I can use the collective knowledge of the better my understanding and in turn continue to help others around me - the OB community included.

  • noyesmaybeok on 04/01/2017 - 16:07

    Discuss with an accountant.

    You can't just "hire employees" if they are elderly/doing nothing.

    A family trust arrangement does offer some distribution avenues. If everyone is making ~$30k, then tax rate will be rather low.

    • pascher on 05/01/2017 - 13:40

      Thank you for your direction…

      I am looking to try and understand the ins and outs myself, and actually enjoy reading and learning from others, I have been referred to a trust and company specialist acc and lawyer, but I have been to such "professionals" before and the information they provide is at a massive premium to what I want, just the linked information…

      And I think you will find also, that if listed as a director of a company, that distributions of funds can be made to any member that takes that title - granted they need to be approved and listed as directors of the company. Yes they need to be able to contribute some understanding and effort to the company, but this is not hard to prove, as the income stream is not reliant on active participation.. it is for all accounting measures passive, a constant stream.

      A family trust is not possible in this case due to the nature of the business and the requirements of the industry in which it is set up… also, the complexity and exposure do not warrant the extra paper trail. These is no risk of any outside exposure st this time, and like many family business requires trust for it to work.

      I am well aware of the tax thresholds, and this mitigation to lower levels is the reason why I am looking to do this set up…

      Thank you again for your comment though.

  • coolsteps on 05/01/2017 - 03:14
    +1

    i heard that the new super stream rules are now compulsory even though i only have 1 employee. is this true>?

    • pascher on 05/01/2017 - 13:30

      Mandated super is to my understanding… looking through the com law definitions, this (my first world dodgy) problem lies in the non-mandated areas.

      http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND…

      There are a couple of things to help small operators with these contributions as per the govs super clearing house, but there is little information about the business implications of these to a company bottom line.

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