The Benefits of Tax Planning
When people purchase investments, they often consider short term tax considerations – i.e. positive or negative gearing but may not consider the medium-long term considerations such as who will be liable to pay any Capital Gains tax when the do eventually sell an asset.
- Positively geared investments pay you more in income, then they cost you to hold.
- Negatively geared Investments cost you more to hold, then they pay you in income. This can often be a good strategy for clients who are on good incomes with healthy surplus cashflows.
- Neutrally geared investments cost you about the same amount to hold, as they pay you in income.
How We Help
We assist our clients to weigh the pro’s and cons of both short and medium-long term tax considerations as part of their overall investment strategy. This can be particularly prudent when there is a large difference in incomes within a household.
Another important consideration can be which structure to acquire assets in. The capital gains tax exemption on your home is a “free kick” available to all Australians but outside of this, it is important to consider whether to own assets individually, jointly with your partner OR whether there may be better tax outcomes from investing in a Family Trust or Company Structure, or if Superannuation may be the best option. Each has their own pro’s and con’s as you would expect.
It is also important to remember that it is not about tax minimisation at all stages of your life as well. Business Owners, in particular, will typically go out of their way to minimise the amount of tax they pay each year. This can become a problem in a couple of scenarios:
- In the event you need to apply for a loan, reducing your taxable income will reduce the amount a bank is willing to lend.
- If you need to claim on your Income Protection Insurance, having a lower taxable income may mean you are entitled to a lower benefit
As clients approach retirement, we will discuss the pros and cons of selling assets sooner, potentially to help pay down a remaining mortgage, vs retaining the asset for longer, possibly selling it after they stop work when they may benefit from paying less capital gains tax.
Finally, we assist our clients by making sure their retirement savings can transfer to the next generation without any unwelcome tax penalties. By managing the taxable balance within clients superannuation accounts, we can potentially eliminate the 17% tax that would be paid on clients superannuation balances, potentially saving 10’s of thousands of dollars (Sometimes hundreds of thousands of dollars)
What Else We Do
Call Mark
07 3524 8505
Email Mark
mark@thebaysideinvestor.com.au
Visit Mark
Ormiston & Coorparoo (By Appointment) 26 Raby Esplanade, Ormiston, QLD 4160
