Comparative table of different business structures

This chart is intended to provide a quick reference to factors considered relevant in the selection of trading and investment structures.

 

 

Individual Partnership Discretionary trust Unit trust Company
Exposure to liability Unlimited Unlimited, as well as joint and several Limited — subject to trust deed Limited — subject to trust deed Limited
Control over assets Absolute Joint Uncertain Collective Separated
Accommodation of general wealth creation Wealth at risk Wealth at risk High level of asset protection Wealth at risk Company wealth
at risk
Ability to obtain finance Good Good Reasonable Good Good
Disclosure of results None None — other than between partners None None — other than between unit holders Disclosure requirements in accordance with the Corporations legislation
Compliance costs Low Low Medium Medium Medium — high
Exposure to personal factors Moderate to high Moderate to high Moderate Moderate — low Low
Employee v proprietor Proprietor Proprietor Employee Employee Employee —
Director
Accommodation of succession planning Low Low High Moderate Moderate
Accommodation to estate planning High Moderate — low High Moderate Moderate — high
Ability to restructure Low Low High Moderate Moderate
Immediate and ultimate rates of tax Personal marginal rates Personal marginal rates Beneficiary rates — marginal or corporate Beneficiary rates — marginal or corporate Initial company rate — top up or refund to personal rates
The tax base Business expenses limited Business expenses limited — some Normal — ability to provide benefits to associates Normal — ability to provide benefits to associates Normal — benefits to employees and shareholders subject to FBT and Div 7A
further financing expenses without FBT or Div without FBT or Div
7A 7A
Access to concessions generally Good Good Moderate Initially good — but subject to claw-back Initially good — but subject to claw-back
Access to 50% CGT discount Yes Yes Yes Yes (post 1 July 2001) No
Access to small business concessions Yes Yes Yes — subject Yes — subject Yes — subject
to “significant individual” test to “significant individual” test and claw-back to “significant individual” test and claw-back
Income diversion and accumulation Little opportunity Moderate opportunity High opportunity Moderate opportunity Low to moderate opportunity
Incidence of tax losses Personal Partner level Quarantined in trust Quarantined in trust Quarantined in company
Ability to carry forward tax losses Unlimited Unlimited Subject to complex carry forward rules Subject to complex carry forward rules Subject to complex carry forward rules
Incidence of financing costs Personal Partner level Trust Trust or unit holder Company or shareholder
Cash flow considerations Good Good — subject to agreement Good — subject Good — subject Poor — subject to distribution or Div
to distribution or loan to distribution of loan 7A commercial loan
Private and business expenses Mixed Mixed All business All business All business
Effect on social security entitlements Direct Direct Possible Direct Direct
Alienation of personal income rules Do not apply Do not apply Potentially apply Potentially apply Potentially apply
Super contributions Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps Deductible — subject to caps
Possible application of anti-avoidance provisions Low Low — medium Medium — high Medium Low

 

 
This is a checklist ONLY. There are numerous taxation and non-taxation considerations which flow from the content above, which require consideration and analysis in reaching a decision as to an appropriate structure for individual circumstances.

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