We have owned a pty company for the past 30 years and we are looking at retiring in the next few years. There is a substantial amount in the bank and a large franked credits balance.
Is there any issue with drip feeding dividends to ourselves over a number of years post retirement to minimise tax?
Would be best to see a tax agent or financial advisor or ask ASIC and ATO
Not sure - I haven't read anything that would prevent this. Remember you would still be paying the annual ASIC fee and double check if the company is a base rate entity or not to work out the franking credits
Nope, and it usually makes sense to do under the current tax law - as long as they don't change the rules about refundable franking credits! Also look at whether your company will be changing from a base rate entity to a standard 30% tax rate entity. If it's been running a business and taxed at 25% until now, you may find post retirement you are able to frank at 30% if more than 20% of the company's income is from passive sources after retirement. That would likely leave you with an amount towards the end of your distributions that cannot be franked, but allows you to get more franking credits out now. Chat with your accountant about all this
This isn't quite right. To be a base rate entity, there are two tests:
(a) aggregated turnover must be less than the threshold (presently $50m); and
(b) 80% or less of assessable income must be base rate passive income.
So, in response to the original question, if base rate passive income exceeds 80%, the entity is no longer entitled to the 25% tax rate. The 30% tax rate will apply :-(
See:
https://www.ato.gov.au/tax-rates-and-codes/company-tax-rate-changes#Baserateentitycompanytaxrate1
Thanks, brain fade, meant to say 80% passive or less than 20% active. Overall principle is it's good if you get to pay tax at 25% while the company is earning its business income then frank at 30% when dribbling it out of the company when they are retired
22 Apr 2024 · 6 min read time
15 Apr 2026 · 5 min read time
15 Apr 2026 · 4 min read time
72 views
4 replies