How to Leverage Ownership of Assets to Save on Tax

We live in quite unprecedented economic times. And yet well-known and legal business tax saving strategies apply just the same. Even more so now that every business is looking to streamline their operations and come out ok at the other end of the recession.

Take structuring ownership of assets as an example: Moving personal assets, businesses and investments between individuals or entities can save tax in several ways:

  • It can create upfront or ongoing tax deductions (or both). For example, transferring a private motor vehicle to a company will generate an upfront deduction (if the market value of the car is less than $20,000), plus ongoing tax savings of $2,500 – $3,000 pa.
  • It can create taxable or capital losses. These losses can be achieved by selling loss-making investments (to related parties, or by selling them and repurchasing them).
  • Change the taxpayer (individual or entity) receiving the assets’ income and deductions. For example, selling a commercial property from a high-income earner to their self-managed super fund reduces the tax rate on income earned.

Factors to consider in reviewing the ownership of assets include:

  • Tax – now, in the future, and on an asset sale.
  • Simplicity.
  • It is separating business assets from valuable assets/investments.
  • Commercial considerations.
  • Borrowing and finance.
  • Exit strategies.
  • Growth and flexibility options.
  • Business risk levels.
  • Control of the business and assets.

By reviewing the ownership of assets to choose the optimum ownership structure for your unique circumstances you may be able to save up to $5,000 in tax deductions.

Before you go down this path, I recommend that you ask your accountant to calculate the costs of changing the ownership of the asset, i.e. stamp duty, establishment costs, accountants’ fees, legal fees, capital gains tax, etc.

Once you’re clear on that, your accountant can recommend the optimum ownership structure (s), which may involve establishing a new business structure (s) – where necessary. The last step would be the transfer of the assets.

Not sure if this tax savings strategy could work for you? If you need help to best manoeuvre your business through these tough economic times, feel free to contact us for a FREE Covid-19 Business Recovery Session.

Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.