Business Structures and Tax, Tax planning vs evasion

How is a sole trader taxed?

Business income is treated as personal income and taxed at individual rates.

What is the main risk of being a sole trader?

Unlimited liability — personal assets are at risk.

How are companies taxed?

25% for small companies, 30% for large companies.

What are franking credits?

Credits given to shareholders for tax already paid by the company.

How are partnerships taxed?

The partnership doesn't pay tax — partners pay tax on their share.

Why are trusts popular for tax planning?

Income can be distributed to beneficiaries in lower tax brackets.

What is tax planning?

Legal strategies to reduce tax within the law.

Give examples of tax planning.

Super contributions, deductions, CGT discounts, and trust distributions.

What is tax evasion?

Illegal and dishonest actions to avoid paying tax.

What's the key difference between planning and evasion?

Legality and honesty — tax planning is allowed, tax evasion is not.