What is a Company?

A company is separate, legal entity formed under the Corporations Law and is administrated by its directors. It is formed by people who own its shares and whose liability is linked to the amount (if any) unpaid on the shares respectively held by them.

We assist clients

  • Purchase a shelf company or establish a new company.
  • Register for ABN.
  • Register for GST (if applicable).
  • Register for PAYGW (if applicable).

Advantages

  • Liability limited to unpaid capital only
  • Ability to dispose of the shares rather than the investment, reducing stamp duty and other costs.
  • Corporate tax rate lower than the top individual marginal rate.
  • Flexible in distribution of income, with some restrictions in case of Personnel Services Income entities.
  • No workers compensation on director’s fees or dividends.
  • Imputation credits can be passed to shareholders.
  • Superannuation contributions deductible up to age base limits
  • Retain earnings in the company effectively limits the tax rates to 28.5% or 30% – however companies cannot be used to shelter personal exertion income.

Disadvantages

  • Cost of establishing and maintaining is higher.
  • Director’s potential liability in case of negligence or insolvent trading
  • Superannuation contributions is required on wages paid.
  • Losses cannot be distributed to shareholders.
  • More compliance issues Accounting standards and ASIC.
  • Capital gains tax concessions are more difficult to access.

Compliance Requirements

  • ABN registration
  • Tax File Number application.
  • GST registration (if applicable).
  • BAS – monthly or quarterly
  • Tax Return – Yearly
  • Financial records – financial accounts balance sheet and profit and loss in required format.
  • ASIC annual return yearly and other charges in directors shares holding etc.

General Comments

This structure is a popular structure for people running a Business where there is a requirement for asset protection and tax minimisation. If the company is a Mum/Dad type arrangement and they require both asset protection and tax minimisation we recommend a single director company with assets held by the non director. Public liability is compulsory. The tax rate is 30% which is lower than the top individual marginal rate of 45% plus 2% Medicare levy plus any temporary levies in place. As from 1 July 2015, the tax rate of businesses with a turnover of less than $ 2 million (defined as Small Business Enterprises in the Tax Act) has been reduce to 28.5%.