It is good to seek advice and regularly consider your business structure – such as whether using a company to operate your business is best. Operating as a company has some tax and commercial benefits, eg many organisations prefer dealing with companies rather than individuals or trusts, but it could be cheaper to operate as an individual, especially in the initial stages.
The 30% individual marginal tax rate (31.5% including Medicare) now applies in 2012 onwards to income up to $80,000 and the top marginal tax rate of 46.5% applies above $180,000. This means the company tax rate of 30% is becoming less attractive with taxable income up to $80,000 – that is, revenue less expenses.
So a couple with a family business can have an annual net income of up to $160,000 before their salaries will be worse off from a taxation perspective if they retain profits in the company. Best to seek a tax professional to see what is best for your situation.
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