Minimise tax in general (legally)

[monalisa]

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,

If you are thinking of setting up a trust, I would keep the business affairs in a separate entity for asset protection purposes. You could have a separate trust which could accumulate wealth.

You can 'gift' some of your excess income, and distribute income to your partner/family members. But I think it is only worthwhile say if your earnings are well above the $180K p.a. threshhold.

Investing in shares would only mean you will generate further income, and perhaps pay further tax (depending on your tax bracket).

 

[The Y-man]

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.

I just plain borrowed a lot of money, lent it to a family trust, and traded shares.
The earnings we distributed to the lowest income earner and in really good times a corporate beneficiary.

Managed to get my income tax down to 16% on a decent income.

Mind you:

1. It turned to #@$% with the GFC and ended owing lots of money
2. Didn't have much cash left to buy daily necessities! Because paying little tax means actually having very little money in your hands for personal use including eating! - it is used for investing...

The Y-man

 

[Shaneelastic]

how to minimise tax
earn less income

 

[alexlee]

I just plain borrowed a lot of money, lent it to a family trust, and traded shares.
The earnings we distributed to the lowest income earner and in really good times a corporate beneficiary.

Managed to get my income tax down to 16% on a decent income.

How does that work? If you deduct the interest paid on the borrowings, the trust would have to pay you at least that rate on the money you lend to the trust. Sure, the earnings on the investments can be distributed to a lower income earner, but your personal rate won't change because the effect on your taxable income cannot be negative.

 

[oracle]

buying shares; - have started learning about those, lost 1.5K in the first trade ; trading QBE ; burnt my fingers ; beginners luck didnt apply in my case

buying trees: - wow havnet looked into it, can you guide?

buying more properties: have only looked in melb, yields are horrible, and prices are too high (having said that my IP has tanked by 5-7% ). Dont see enough CG in future unless I start to change my mindset and look in different states.

Looking into Asia right now, currency exchange rate is high

Trading currencies: tried that , lost in the first trade swapping AUD vs USD, have lost self belief and needs more work in that area.

regards,

I think you haven't tried one thing yet. Buy shares of quality businesses when they are selling cheap and then hold on to them. Keep doing that and soon you will earn enough money from dividends to be able to retire.

How do you define quality businesses?

It's not an easy question but few things to keep in mind that define a quality businesses are:

Businesses that have been around for atleast 15-20 years and have been consistently growing (earnings and dividends) during that time. Businesses whose economics is fairly easy to understand. For eg. Its not hard to know how Supermarkets and Banks make money. Also, it is a pretty safe bet that they would be needed by society in 10-15 years.

It's not a get rich quick scheme but I think it works just like your resi property.

I already earn enough from dividends to replace twice my yearly living expenses. The goal is to have enough income so 50% of it is used to replace living expense and mortgage repayments and the remaining 50% re-invested so the investments keep growing. For me financial independence is the goal rather than retirement. I am 32 so have plenty of time to kill before I die, hopefully

Cheers,
Oracle.

 

[The Y-man]

How does that work? If you deduct the interest paid on the borrowings, the trust would have to pay you at least that rate on the money you lend to the trust. Sure, the earnings on the investments can be distributed to a lower income earner, but your personal rate won't change because the effect on your taxable income cannot be negative.

You are correct! I missed a very important bit in there

I forgot to mention the 10 massively negative cashflow properties in the mix

The Y-man

 

[Aaron_C]

Negatively geared properties are the bomb.

 

[tess85]

Minimise tax by donating to charity before the EOFY!