Effective ways to reduce tax for a high income earner

[exstatic]

Hey guys, on one of my forums, a member posted this question, and I figured here would be a great place to get advice for them! Here is the question;

I have recently been offered a position in Sydney which is paying over $100k per annum.

This is about a 45k jump from what I am earning now in my 9-5 job so its a massive step up.

I have done my sums and theoretically you think I would be almost taking home twice as much per week after tax.. but due to being in the higher tax band, I am only taking home about 25% more after tax.. still not to bad but I would like to utilize this package as best as possible.

Does anyone have any tips on how I can maximise my package and reduce my taxable income to my benefit? Things like salary sacrifice, negative gearing.. etc?

Help would be appreciated!

Anyone got any suggestions for my mate?

 

[MattR]

Some ways to reduce tax - well that's easy just spend more on deductible expenses and hey presto, tax saved.

I guess that they want to save tax and have more cash in hand as well....in that instance;

- if they need a new car, check out the benefits of a novated lease
- depending on their age, ie over 55 or close to it, consider a transition to retirement income stream
- private health insurance, checkout whether or not they will go over the new thresholds
- negative gearing with smart investments (!!!!)

 

[Programmer]

"Effective ways to reduce tax..." can be in the goals of the beholder.

More information would be required before any suggestions could even start to be considered. How old? Personal debt? Spouse? Dependants? Life goals? Current super balances? Current investments outside super? Investment debt? Study (HECS,HELP,SFSS) debt?

etc...

 

[yo yo ma]

Things like salary sacrifice, negative gearing.. etc?

I think the person has answered their own question, though it really does depend on the factors Programmer has listed.

Salary sacrifice- have a look at what things the employer offers. If the person is young, super may not be the best option to salary sacrifice.

Negative gearing property is great for reducing tax but shouldn't be the only reason to buy. Property should be bought for capital growth, so the person should do a lot of research/ education before purchasing.

Shares paying fully franked dividends (30% tax paid) can be bought but some additional tax may still have to be paid on these. Shares bought with a loan will reduce tax now but CGT may have to be paid in future.

Minimising interest earnt could be considered, by putting spare funds into an offest account paying off non-deductible debt.

 

[Kenster]

By asking this question, it seems this person having limited experience on money matters.

Reducing tax is an aim many try to tackle, some understand how to use good debt to offset it and very few succeed in actually making serious wealth from it.

Buying an "investment" to reduce tax is easy, but actually making money from it is hard, especially in today bearish market. One may end up losing more money through negative gearing than through tax.

I would suggest him to spend time / money on learning how money works first.

 

[josko]

By asking this question, it seems this person having limited experience on money matters.

Reducing tax is an aim many try to tackle, some understand how to use good debt to offset it and very few succeed in actually making serious wealth from it.

Buying an "investment" to reduce tax is easy, but actually making money from it is hard, especially in today bearish market. One may end up losing more money through negative gearing than through tax.

I would suggest him to spend time / money on learning how money works first.

Wise words Kenster,

Direct and well said without sounding condescending.

Regards Jo

 

[exstatic]

By asking this question, it seems this person having limited experience on money matters.

Reducing tax is an aim many try to tackle, some understand how to use good debt to offset it and very few succeed in actually making serious wealth from it.

Buying an "investment" to reduce tax is easy, but actually making money from it is hard, especially in today bearish market. One may end up losing more money through negative gearing than through tax.

I would suggest him to spend time / money on learning how money works first.

Hey Ken.. nice post, can you explain a little further what you mean by him needing to learn how money works?

The way I read his post is he wants to use his money effectively to reduce his taxable income by investing it in the most effective manner..

Some of the answers have been to invest in super or property, which is great.. but if he was just to put say 20k of his income per year into a good property and not utilize tax laws and deductions, does that mean he doesn't know how to invest?

I am assuming the type of answer he is looking for is advice on how to structure his income to be suit investing?

 

[Dazz]

Buy a majority-land based property, that exhibits reasonable cashflows, and pre-pay the interest bill every year.