Tax rates for rental profits?

Question from Jimmy updated on 25th February 2014:

Hi, our rental profits of around $10,000 will be kept in the company this year and the company will have to pay the provisional tax next year. Will have to pay individual provisional tax if the profits are distributed? Our tax rate is 33%. Please advise which way is better. Can we take the profits out when the company makes a loss next year? What is a reasonable amount? Regards, Jimmy

Our expert Mark Withers responded:

Dear Jimmy, the corporate tax rate is now 28% as against the top personal rate of 33%, retaining the profit in the company is therefore cheaper. Note though that when you distribute the funds from the company in the future, the dividend will have a 28% imputation credit attached to it, an additional 5% witholding tax top up will be required to bring the tax up to 33%.

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

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