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Bucket Company Setup

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    Take control of your business income and reduce your tax liability with a smart bucket company strategy. By directing as much business income as possible through a corporate beneficiary, you can manage your taxable income and pay tax at a lower corporate tax rate rather than the highest marginal tax rate. Our team at ACT Tax Group helps business owners structure their bucket company to maximise tax benefits, protect personal assets, and make your income distribution more efficient — so you can focus on growing a successful business.

    Why Choose ACT Tax Group for Your Bucket Company

    Maximise Tax Efficiency

    By structuring your business efficiently, you can take advantage of the lower corporate tax rate and keep more of your business income within the company. This allows for tax savings compared to the higher individual marginal tax rate, reducing your overall tax burden while complying with the Income Tax Assessment Act.

    Tax Minimisation Strategy

    We help you implement a tax minimisation strategy, ensuring that your company distributes income in the most tax-effective manner. By doing so, you’ll pay less tax on business income, and any retained earnings can be carried over for future investment or tax savings.

    Asset
    Protection

    Using this strategy also provides asset protection by separating your personal assets from your business income. This ensures that your wealth is shielded while still allowing you to maximise your tax advantages.

    Flexible Income Distribution

    The flexibility of distributing income from the trust allows you to allocate it among different beneficiaries, optimising your tax savings. This means you can reduce the overall tax burden for the family group by allocating income based on the individual’s tax rates, maximising the tax benefits of the stru

    Why Set Up a Bucket Company?

    A bucket company may be a beneficial strategy for business owners or investors in Australia. However, whether it’s right for you depends on your individual situation.

    A bucket company strategy is ideal for:
    • Business owners wanting to build wealth for their family’s future.
    • Business owners with fluctuating income across financial years.
    • Business owners approaching retirement or those looking to sell their business.
    However, if you fall under the Personal Services Income (PSI) rules, which prevent individuals from diverting income through companies or trusts to reduce tax, a bucket company strategy may not be suitable.

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    Benefits of a Bucket Company

    Tax Efficiency and Savings

    With the company tax rate set at 25% for base rate entities, you can save significantly on tax. For instance, by distributing business income to the company, you can avoid paying tax at the highest marginal tax rate, which can lead to substantial tax savings.

    Investment and Long-Term Growth

    The structure also works well for managing long-term investments such as shares or property. While companies do not benefit from the 50% Capital Gains Tax (CGT) discount available to individuals, they offer significant advantages in terms of asset protection and reinvestment for growth.

    Simplified Financial Management

    By using this structure, you can simplify your tax management. Income from the trust can be distributed to the company, making it easier to manage your tax return and meet your tax obligations. This reduces the complexity of managing unpaid present entitlements and keeps your financial management straightforward.

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    Optimise Your Bucket Company Structure

    One way to structure your company effectively is to manage any loans or distributions to shareholders through a minimum annual repayment plan. This ensures that unpaid present entitlements are repaid in a compliant and structured way, reducing potential tax payable under Division 7A and keeping your income distribution aligned with the Income Tax Assessment Act.

    What to Do with Funds in a Bucket Company

    Bucket companies can also be used as investment vehicles. The income within the company can be invested in assets such as shares, property, or other long-term investments, helping to grow your wealth.

    Next Steps

    It’s crucial to seek professional advice when structuring your business entities. A bucket company can play a key role in your tax planning strategy, but its suitability depends on your unique financial goals. Our experienced tax accountants can help you assess your situation and determine if a bucket company is the right choice for your business.

    Get in touch today for a consultation and see how we can help you optimise your business structure.

    Frequently Asked Questions

    What is a bucket company and how does it work with a trust?

    A bucket company, also called a corporate beneficiary, is a company set up to receive distributions from a trust. This allows business income to be taxed at the corporate tax rate rather than the higher individual marginal tax rate, helping business owners manage their tax liability in a tax effective manner.

    Business owners, investors, and family groups can benefit from a bucket company structure. It’s especially useful for those who want to distribute as much business income as possible at a lower corporate tax rate, protect personal assets, and plan for business income moving forward.
    By directing trust’s income to a corporate beneficiary, taxable income is taxed at the lower corporate tax rate, rather than the highest marginal tax rate for individuals. This strategy can reduce total tax paid and help retain earnings for reinvestment or long-term investments.
    Yes. There are rules under the Income Tax Assessment Act, Division 7A, and family trust regulations. It’s important to structure distributions in the most tax effective manner and ensure compliance with Australian Taxation Office requirements. Seeking professional advice is recommended to avoid unexpected tax obligations.
    Yes. Beyond managing business income, a bucket company can hold long-term investments such as shares or property. While companies don’t receive the 50% Capital Gains Tax discount that individuals get, this structure helps protect assets, manage retained earnings, and plan for future growth.

    Important Disclaimer

    The information contained on this website is provided for general use only. It has been prepared without consideration of any individual’s personal objectives, financial situation, or needs. Any reliance placed on the material is at the reader’s own risk.

     

    Nothing on this website should be taken as taxation, accounting, or legal advice. ACT Tax Group Pty Ltd, its directors, and employees expressly disclaim all liability for any loss, damage, cost, or expense incurred by any person who relies, wholly or partly, on the information provided.

     

    Tax legislation, rulings, and regulatory requirements may change at any time, and their application will vary depending on specific circumstances. You should seek independent, professional advice from a registered tax agent or qualified adviser before making decisions based on this information.

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