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  1. #11
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    Quote Originally Posted by babyno1onboard View Post
    I'd go with option 2 but work out what the tax would be on that money and put it aside until after tax time in case tax is payable. I'm with the others that it doesn't sound right that it's tax free. I'm not an accountant though.
    No I totally agree! I am really keen to see it in writing now. The only other thing i can think of is he gets 5% AFTER tax has been taken into account? Or dh has just simply misheard/misunderstood and got it wrong about it not being taxed.

  2. #12
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    Take to an accountant to discuss with properly tax implications etc when you get paperwork so you dont get any surprises

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    Quote Originally Posted by Mummy12 View Post
    Take to an accountant to discuss with properly tax implications etc when you get paperwork so you dont get any surprises
    Will be getting my mum to look over it closely as she knows about this stuff.

  4. #14
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    I'm a chartered accountant and I'm just struggling to understand how a company pays out profits to an employee when they don't hold shares and it's not a bonus.

    as you say, the details provided on their own aren't enough to come to a solid conclusion.

    but there's only a limited number of ways a company is able to legitimately distribute its profits; either as a franked/unfranked dividend (which would require him to be a shareholder) or by way of a bonus (which is taxed and has super paid on it). there's really no other way to do it so please keep us updated about more info on option 2. it's got me curious now

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    SheWarrior  (03-11-2015)

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    Quote Originally Posted by SheWarrior View Post
    Yeah the not taxed part didnt sound right to me either.

    Its a local engineering and geotechnical company run by a husband and wife. Has been around for years and in the last few years has grown considerably. Dh on his own also has a big reputation in the industry and as a result has brought a lot of major clients and scored several new client contracts worth big money. The boss doesn't know much about the area fh works in (boss is more the engineering side), and created this job specifically for dh knowing his reputation and the sort of work he can bring in. Dh feels for the first time in his career, he is finally being rewarded for his hard work and the boss (and wife) really do look after him and our family (which they do, they are lovely people). No hubby doesnt hold shares in company.

    Definitely interested to see it written on paper how it will work. Knowing dh he probably misheard about the tax part. Will be getting my mum to go over it with a fine tooth comb as well as she knows a lot about this stuff.

    Eta- when dh told me about it this morning, he didn't use the word bonus. He just said he would receive 5% of any profit made every 6 months.
    Given its run by a husband and wife I can only think of 1 way it might be done. If it's structured as a partnership and they take the 5% as drawings and give it to DH then they will still be paying tax on it and it will effectively be a gift. Not sure how the tax man would feel about that.

  7. #16
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    Be cautious about the definition of "profit". There are many ways this can be interpreted for this purpose. It can also be impacted by non-cash items (depreciation, impairment etc) and items outside the control of your DH.

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    that's not really possible though. the husband and wife partners would be taxed on the partnership distribution at year end each. why would they then "gift" anything to anyone? it makes no sense at all.

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    Quote Originally Posted by trustno1 View Post
    It won't be "tax free". If the company don't pay tax on it, you and hubby will have to come tax time. And if the $25k or so a year pushes hubby into a higher tax bracket, you could end up even worse off, cause you'd owe extra tax on every dollar he earns.

    This isn't true. It's also the reason why people think they're worse off if they're earning a higher wage. You only get taxed the high amount on every dollar earned after the threshold.

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    Quote Originally Posted by Anndrosa View Post
    Be cautious about the definition of "profit". There are many ways this can be interpreted for this purpose. It can also be impacted by non-cash items (depreciation, impairment etc) and items outside the control of your DH.
    yeah this is a good point too. what is their definition of "profit". dh might bring in big clients which increase revenue/turnover but due to non cat expenses like the examples provided, the profit might look unimpressive.

    you'd definitely want a very clear idea of what he's going to get and what his share of profit is to be based on.

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    Take the tax out of the equation. You'll pay tax on option 1 and option 2 so it doesn't really matter.

    Go for whatever will bring the highest gross income.

    Personally and based on what information you gave I'd go for option 2.


 

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