The Aspira ProfitGuard Strategy: Protecting Business Profits from Trading Risks

By Jaye Mankelow

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As part of Aspira’s commitment to safeguarding business wealth, our Aspira ProfitGuard Strategy offers a practical solution for business owners looking to protect surplus cash from the risks associated with daily operations. By utilising a structured approach that includes a bucket company and a family trust, the ProfitGuard Strategy helps keep profits secure and insulated from trading liabilities, while also providing tax efficiencies. This article explains how the ProfitGuard Strategy works and the benefits it provides.

Why Use the ProfitGuard Strategy?

In a trading business, excess cash can be vulnerable to risks like claims, debts, or unforeseen liabilities. The ProfitGuard Strategy moves surplus cash out of the trading entity, ensuring it’s held securely in a separate entity—away from business operations and potential exposure.

How the Aspira ProfitGuard Strategy Works

The ProfitGuard Strategy involves a series of steps to move profits out of the trading entity and into a secure bucket company via a family trust:

• Step 1: Declaring Dividends to the Family Trust

At the end of each financial year, the trading entity declares a dividend to the family trust. Instead of distributing profits directly to individual shareholders, this approach allows profits to be managed centrally within the family trust.

• Step 2: The Family Trust as a Distribution Hub

Acting as the core of the ProfitGuard Strategy, the family trust receives dividends and can allocate them to various beneficiaries. Instead of exposing funds to high personal tax rates or risk, the trust directs a portion of profits to a specially designated entity: the Aspira ProfitGuard Company.

• Step 3: Safe Storage of Profits in the ProfitGuard Company

The family trust distributes profits to the ProfitGuard Company, a bucket company where funds are taxed at the corporate rate. By holding surplus cash here, the business ensures that profits are protected from liabilities within the trading entity.

Key Benefits of the Aspira ProfitGuard Strategy

The ProfitGuard Strategy provides multiple advantages, enhancing both asset protection and tax efficiency:

• Enhanced Asset Protection: Moving profits to the ProfitGuard Company keeps funds separate from the trading entity’s operations. This structure provides a financial “guard,” protecting against claims, debts, and other risks associated with business activities.
• Tax Advantages: Retaining profits in the ProfitGuard Company allows income to be taxed at the corporate rate, which is typically lower than individual tax rates. Additionally, the family trust allows controlled distributions, which can be timed to optimise tax outcomes.
• Financial Flexibility: Profits stored within the ProfitGuard Company are accessible for future investment, reinvestment in business growth, or dividend issuance to shareholders when strategically advantageous.

Considerations for Using the ProfitGuard Strategy

While the ProfitGuard Strategy is highly effective, there are key compliance requirements to keep in mind:

• Division 7A Compliance: Loans or payments from the ProfitGuard Company back to the trading entity or to related individuals must comply with Division 7A regulations. These anti-avoidance rules can reclassify loans as dividends if not structured properly, resulting in additional tax.
• Purpose and Documentation: To maintain compliance, it’s essential to clearly document the purpose of the ProfitGuard Strategy within your financial and business plans, ensuring that it aligns with genuine asset protection and operational needs.

The Aspira ProfitGuard Strategy provides small business owners with a structured approach to protect surplus profits from operational risks, while also enhancing tax efficiency.

By moving cash out of the trading entity and into the ProfitGuard Company, business owners can confidently grow their business, knowing their assets are shielded. If you’re interested in implementing the ProfitGuard Strategy, our team at Aspira is here to guide you through the process, helping you secure and manage your profits for long-term success.
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