June 2005

INCORPORATION

As a result of the changes to the individual State Health Acts, there has been some promotion of aggressive structuring techniques by some professional firms.


One recent example involved the promoting the assignment of partnership income to a trust. It is important to remember that any structuring must be done with the commercial aspects being paramount with any tax consequences following a close second. If tax advantages are the primary driver you could fall foul of the Tax Act's anti-avoidance provisions.

On a different note and regardless of the tax advantages there are some sound commercial advantages for pharmacists seeking to buy a pharmacy in a company or roll-over their existing pharmacy into a company. The two main cashflow issues requiring consideration if you are considering rolling over your business into a company are stamp duty and capital gains tax.

The disadvantage for some pharmacists transferring their pharmacy to a company will be the possible loss of some small business capital gains concessions (although CGT can often be negated via the use of superannuation).

Stamp duty varies in each State therefore you should consult your JR Partner to discuss. For those of you carrying large amounts of debt though, the cashflow advantage created by the tax differential between the top individual rate of 48.5% and the corporate rate of 30% may well be too compelling.

Other stories

- Service Trusts
- Choice of Fund
- Abolition of Surcharge

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