Minimise tax in general (legally)

[tvadera]

Hi All,

I am a high income earner and my partner is not. I have an IP under my name and its negatively geared,so I get some sort of deductions through negative gearing.

I also voluntarily contribute to my super fund to minimise my tax obligation. I also pre-pay expenses in full (like investment prop insurance, etc)

Just want to find out from members, how do they minimise their tax obligations legally.

-Do people form a family trust and distribute income to low income earners? Is it allowed, can anyone do it?

- Do people invest in shares or any other deductible assets?


It would be good to see what sort responses I get

Regards,

 

[Aaron_C]

-Do people form a family trust and distribute income to low income earners? Is it allowed, can anyone do it?

- Do people invest in shares or any other deductible assets?

Yes and Yes. But if you are PAYG then it will not be possible to use a family trust to distribute income effectively.

 

[tvadera]

Hi Aaron,

I have a comp n wife is a payg..
Can I then have family trust to distribute income?

 

[Aaron_C]

Hi Aaron,

I have a comp n wife is a payg..
Can I then have family trust to distribute income?

If you are self employed then you can use the family trust to distribute income.

However if your structure atm is a $2 company with you as the only shareholder then you would face some CGT consequences etc if you decided to turn the business into a family trust instead.

 

[wobbycarly]

Hi All,

I am a high income earner and my partner is not. I have an IP under my name and its negatively geared,so I get some sort of deductions through negative gearing.

If you are negatively geared, then a trust won't help you distribute anything from the property; ie. a loss stays in the trust.

I also voluntarily contribute to my super fund to minimise my tax obligation. I also pre-pay expenses in full (like investment prop insurance, etc)
*snip*

Pre-paying only "saves" in the first year if you have an ongoing high income. Otherwise you have to keep prepaying to "stay in front".

 

[tvadera]

Is there anything that I can look into , to draft some sort of a plan to minimise tax obligation
-any tips
-common practises used by forum members

On the property front, I am really good with the deductions
- water
- council rates
- Depreciation {done via Depreciator}
- Travel expenses
- Sundry expenses
- Mobile, Postage
- Insurance
- Agent fees
- Maintenance & repair expenses
- Interest charges
- Any fees associated with borrowing expenses
- Accountant fees

 

[Dazz]

Is there anything that I can look into, to draft some sort of a plan to minimise tax obligation
-any tips

Yeah sure....see the link.

http://www.ato.gov.au/

 

[Melbournian]

you could just prepay your interest on your IP, buy a new computer, take a overseas trip for training (depending on your profession) etc, if you have medical costs get it done now.. for dental etc.

 

[marty998]

Simplest thing you can do is claim all your deductions and put everything like donations/tax accountant fees etc in your name only. Hard to hide PAYG or investment income so focus on your expenses.

I take the view that paying tax (on investment income) is good - you only pay it if you make a profit.

In years to come I may actually crack a smile when I use up all my carried forward losses and start paying CGT. The number inserted into that box on the tax return is a yearly reminder of just how much I've blown up during the GFC.

 

[tvadera]

Yeah sure....see the link.

http://www.ato.gov.au/

Thanks Dazz, pointing me in the right direction

 

[Terry_w]

Try getting 101 ways to save money on your tax legally 2012/13 edition. I just picked one up in dymocks for about $18 (tax deductible) and have learned a few things.

 

[sanj]

If you are negatively geared, then a trust won't help you distribute anything from the property; ie. a loss stays in the trust.

cant your (or in this case the OP's) business stream dividends through to the loss making trust?

 

[Terry_w]

cant your (or in this case the OP's) business stream dividends through to the loss making trust?

If the trust was a shareholder.

 

[sanj]

If the trust was a shareholder.

im not sure of the technicalities, i just know that is how we've got it set up. i assume it can be just a single share cant it?

certainly helps with the old income losses being quarantined in the trust issue

 

[Terry_w]

Depends.

If there are 1000 shares and the trust owns 1 then only 1/1000th of any dividends would go to the trust.

Depending on your circumstances it may be better to have all the shares owned by the trust.

 

[dan c]

im not sure of the technicalities, i just know that is how we've got it set up. i assume it can be just a single share cant it?

certainly helps with the old income losses being quarantined in the trust issue

It can, as long as the trust is a shareholder.

We have set up client companies with different classes of shares. The trust holds one class, directors own another class etc. This allows the company to pay dividends to the trust to soak up losses, without paying a dividend to the high earning directors.

 

[coastymike]

and if the franking credits are greater than $5k make sure that a family trust election has been done otherwise you will lose the franking credits

 

[tvadera]

Hi,

Which items can I pre-pay to get an deduction before the financial year end?

Regards,
TV

 

[Peter_Tersteeg]

As the OP is self emlpoyed, presumably he owns the buisness. If the wifes income is low, why not give her a second job and distribute business profit to her, whilst reducing his income. This will likely normalise the tax and save overall.

 

[tvadera]

Hi Pete,

I can't do that because I am an IT contractor.

Hence do not pass 80/20 rule and hence all the income is classified as PSI.

Deductions are very minimal for PSI entities.