AJML GROUP PTY LTD AND RELATED ENTITIES ◊ AJML TAX SERVICES PTY LTD ◊ AJML BUSINESS SERVICES PTY LTD ACCOUNTING ● TAXATION ● BOOKKEEPING ● COMPANY FORMATION ● TRUST FORMATION ● BUSINESS ADVISORY ● TAX PLANNING ● MANAGEMENT REPORTING ● SELF MANAGED SUPER FUND Tax Planning with Alan Liang Registered Tax Agent, CPA, B. Bus (Acc. & Mk.)

What does AJML offer? We help small businesses and individuals with their:  Accounting  Taxation  Tax planning  Bookkeeping  Company formation  Trust formation  Self managed super funds  Management reporting  Business advisory

What is tax planning? Tax planning is a generic term that embraces all the ways in which taxpayers plan to reduce their tax liabilities without engaging in tax evasion, including using different structures.

What is tax liability? The two main taxes 1.Income tax  The term “income tax” is defined in s 3(1) of Income Tax Assessment Act  For example: tax from salary and wages  For example: tax from ordinary business income 2. Capital gains tax (CGT)  Under part 3-1 of ITAA97, a capital gain will arise where a CGT event happens after 19 September 1985 to a CGT asset and the capital amount that you receive from the CGT event exceeds the total costs associated with that event.  For example: profits on sale of shares  For example: profit on sale of investment properties

The Income Tax Rates Table Plus Medicare levy is normally 1.5% of your taxable income, depending on your circumstances. Company – flat rate 30% on net profit Income (From Jul 2007) Income (From Jul 2008) Tax Rate ( budget) $0 - $6,000 Nil $6,001 - $30,000$6,001 - $34,000Nil + 15% of excess over $6,000 $30,001 - $75,000$34,001 - $80,000$4, % of excess over $34,000 $75,001 - $150,000$80,001 - $180,000$18, % of excess over $80,000 $150,001 +$180,001 +$58, % of excess over $180,000

What is tax evasion? Tax evasion involves unlawfully escaping liability for, or payment of, tax. It is when someone has deliberately and dishonestly evaded tax. Examples :  failing to declare assessable income.  claiming deductions for expenses that were not incurred or are not legally deductible.  claiming input credits for goods that GST has not been paid on.  failing to lodge tax returns in an attempt to avoid payment.

What are structures? Business structures Sole trader & partnership TrustCompanySuper Fund Liability Owner personally liable The TrusteeCompanyThe Trustee Tax rates Highest at 46.50%Depends on beneficiaries 30%15% Utilization of losses Subject to non commercial loss provisions Against future income Franking credits No YesNo

Why company?  Pays flexible wages and dividends.  Accumulates franking credits free of charge.  Directors duty is to act in good faith of the company at all times.  Liability is limited to the company.  Risk is limited to the company.  Shareholders are risk free.  Flat 30% tax rate on net profit.

Why discretionary trust?  It distributes income flexibly, earnings could be distributed to the beneficiaries whom earns the least.  Asset protection, the asset are held in trust by the trustee for the beneficiaries.  The trustee controls the asset but do not own the assets in trust.  Legal relationship between the members – trust deed.  Low in running cost.

Why tax planning?  It helps you legally reduce your tax without losing any money.  It helps you reduce your tax liability without engaging in tax evasion.  Tax affects every working individual in Australia on your ability to advance your wealth.

The effect of tax Example: If you started with $2 and invested it at 100% return a year, which means it doubles every year, in five years you would have $32, in ten years you’d have $1,024 and in twenty years believe it or not you’d have $1,048,576…!!! Over a million dollars. (Before tax) $ % per year for 20 years $1 million

What is the difference if tax was payable? Given the exact same circumstances of $2 invested at 100% return a year, if you were taxed at the current highest rate of 46.5%, you would be left with only $6, after the 20 year period!!! (After tax) $2.00 $2 compounded at 100% over 20 years but taxed at 46.5% $6,872.10

$2 Compounded at 100% after 20 years of growth

What can we do about tax? Before AJML tax planningAfter AJML tax planning TaxpayerTaxable 30 Jun 07 TaxpayerTaxable 30 Jun 07 John Fung$180K wage$64KJohn Fung$180K wage$64K John Fung$150K investment income $50KFungshui Family Trust $(150K) investment income distributed NIL Linda FungNIL Linda 30%$18K Tim FungNIL Tim 30%$18K Rachel FungNIL Rachel Fung$1334 minorNIL 46.5% 35.5% $100K Example 1 - our client benefited by effective tax planning with flexible structures, the result was $14,000 tax saving per year!!!

Example 2 - our client benefited by tax effective investment and integrated strategies. The result was $1575 tax saving, plus returns in investments!!! BeforeDifferenceAfter Kevin R Ordinary full time employee Kevin R Salary: $50K Same Salary: $50K Deductions: NIL AJML advice Kevin to invest $35K into forestry investment by borrowing 100% at a rate of 15% Deductions: 5K Taxable income: $50K $35K X 15% = $5K interest fully deductible Taxable income: $45K 07: $10350 Tax saving - $ $8850 Medicare levy: $750 Medicare levy saving - $75 Medicare levy: $675 Payable: $11100 Saving $1575 each year for clubbing!! Payable: $9525

Example 3 - our client benefited by restructure from sole trader to company, The result was $19,000 tax saving per year!!! BeforeDifferenceAfter Wayne S – Sole Trader Liability - limited to company Franking credits – free Wayne S Pty Ltd income: $168KSameincome: $168K Deductions: $2K Wage paid to Wayne - $70K Super paid to Wayne - $50K Deductions: $122K Taxable income: $166K Wayne - $70K Company - $48K Super Fund - $50K Taxable income : $166K %: $54K 30% Wayne’s 30% Super 15% %: $38K Medicare levy: $2K Surcharge: $1.5K Total: $3.5K Medicare levy saving - $1K Private hospital cover – surcharge avoided Medicare levy: $1K Surcharge: NIL Payable: $58KSaving $19K per year for holidays around the world!!Payable: $39K

THE AJML Group There are plenty more ways you could legally reduce your tax without losing any money! The first hour of consultation is free of charge, if you wish to discuss: Please get a pen and note my details

The AJML Group Tel: (02) Fax: (02) Suite 2, 295 Anzac Parade KINGSFORD NSW 2032 PO Box 1098 MERRYLANDS NSW 2160