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With the government looking to reduce the small business tax rate by 27.5 per cent, small businesses who are high-income earners may look to more contribute money to their businesses instead of super, one lawyer has predicted.
Argyle lawyers managing principal Peter Bobbin said higher income earners will be paying 30 per cent tax on their earnings in super.
“If they satisfy the small business rules, on the other hand, once the corporate tax rate has fallen for small business, they’ll only be paying 27.5 per cent tax on earnings and the money will be inside the business,” Mr Bobbin explained.
If the reforms proposed in budget are passed, Mr Bobbin said accountants will need to do a lot more planning with their small business clients.
“If their client is a high-income earner, they’ll need to consider whether it is right for them to recommend contributing to super and suffer a 30 per cent tax, when they might be able to enjoy a 27.5 per cent tax by contributing the money to their business instead,” said Mr Bobbin.