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There are advantages and disadvantages of operating companies in Australia, and we will discuss both here.
The main advantages of operating a company are that:-
The main drawbacks of operating a company are that:-
So the main takeaway is that you have to weigh the pros and cons of operating a company, and if the benefits outweigh the costs.
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When deciding if persons are carrying on a partnership for tax purpose, the ATO looks at the following:
In a common husband and wife partnership, one of the partner is qualified and produces the partnership income, and the other partner may be providing administration labour to the partnership. The profits from the partnership are normally, split equally between the parties.
The aforementioned structure was reviewed by the ATO in 2005, and was held to be legitimate due to the fact that both partners are exposed to liability for the debts incurred by the partnership, hence likewise should have corresponding share of the rewards.
In this respect, if one of the spouse has low or negligible income, the use of the husband and wife partnership can result in substantial tax savings.
The only drawback to the structure is that it can only be used for a tradespeople partnership, and is not recommended to be used by professionals.