17: Avoiding Nasty Surprises: Tax Planning for Private Company Distributions

Private company profits and distributions to shareholders seem straightforward, but complex tax rules can create unintended consequences. In this eye-opening episode, Sally speaks about the potential landmines around dividends, franking credits, tax rates, and anti-avoidance provisions you need to understand as a private company owner. She provides an in-depth look at key tax issues related to private company profits and distributions to shareholders.

Private company profits and distributions to shareholders seem straightforward, but complex tax rules can create unintended consequences.

In this eye-opening episode, Sally speaks about the potential landmines around dividends, franking credits, tax rates, and anti-avoidance provisions you need to understand as a private company owner. She provides an in-depth look at key tax issues related to private company profits and distributions to shareholders.

In this episode of the Smarten Up! The Tax and Business Podcast, you’ll learn:

The two different company tax rates in Australia and how to qualify as a base rate entity (3:12)
Dividend payments: requirements under corporations law, tax treatment, and imputation system (5:36)
Franking credits, franking accounts, and the benchmark rule (8:53)
Franking deficits tax and the holding period rule (12:27)
Division 7A - the anti-avoidance rules preventing tax-free distributions of profits to shareholders (13:50)
- What payments/loans are caught by Division 7A
- Associates of the shareholder
- Exclusions from Division 7A
- Strategies to manage Division 7A implications
Examples of Division 7A situations (21:53)

Sally breaks down the complex rules surrounding private company profits and shareholder distributions. This is a must-listen for those operating private companies to optimise tax obligations.