Where there are large income differences between spouses, or there are children involved, especially adult children who are undertaking tertiary education, significant tax benefits can be obtained by careful tax planning.
Progressive tax rates and tax free thresholds make income splitting popular. If you operate your own business, one of the simplest ways of diverting income is to employ family members. Reasonable payments for services genuinely rendered by family members are as deductible as they would be in any employer/employee relationship. Children and spouses often perform a multitude of different tasks in any small business.
You should keep records of duties performed by each family member and have regard to award rates for work of a similar nature. Consider restructuring your business to a partnership, discretionary trust or company.
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