How does my profit attract ACC?

Our Experts Answer:

It sounds to me like your accountant is allocating the profit to you as salary from the company. The allocation of salary does attract ACC. It's also possible that the salary is attracting tax at a higher rate than the company if you and your wife are higher income earners.

Your alternative is to retain the profit in the company and pay the company tax rate of 30%. If you then decide to draw the surplus cash from the company you will need to make a dividend declaration. The dividend will have the 30% credit for the tax paid attached to it in the form of an imputation credit. The dividend income is not then going to attract ACC. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.