If you've been successful in your working life, then you may be paying tax at the higher rate. This may amount to a significant sum of money on an annual basis, and you'd be well advised to look at strategies that could help you to reduce your obligation. Of course, you must always work in accordance with the law and never try to avoid taxes, but you can use certain strategies that will help to cut down on the amount of money that you need to send to the ATO. What is the best way to go about this?
To begin with, you need to take stock of your current situation. Figure out what assets you already own (such as your home) and determine what your marginal tax rate is. Not every investment strategy may be fully effective from a tax reduction point of view, and it will all depend on your exact circumstances.
While you are doing this, you should also consider the position of any other family members who may also contribute to the overall pot. Sometimes, it may be a good idea for you to put a new investment asset in their name instead in order to maximise the tax situation. On the other hand, you may want to avoid this approach if you want to take advantage of negative gearing, as it may be ineffective for a low-income earner but much more effective for you.
There are many different ways to invest, and you will need to look independently at family trusts, share purchase, investment property acquisition and superannuation to determine the best course of action.
For example, you may choose to buy a company or a share of a number of companies in order to take advantage of a dividend payout. As you may know, dividends come out of after-tax profit, and you may be able to adjust your tax liabilities based on a comparison between your marginal rate and the company rate. You could choose to handle this directly through a straightforward investment, or you could also take advantage of a managed account, where the risk is spread across a number of different organisations.
Superannuation is also a good tax vehicle if you know how to approach it correctly. You could sacrifice a portion of your salary in order to reduce your gross income and bring your tax down that way.
The Best Approach
This can be a very complex area to navigate by yourself and you should ask a tax consultant for help, in order to set up your investment strategies properly.
Hi, my name is Kerry, and recently, I helped my mum set up her own business. She had always dreamed of buying things at charity shops and auctions and then selling them. However, with her advancing age and mobility issues, traveling to boot sales or flea markets wasn't an option anymore. Luckily, the internet made it easy for her to set up a shop she can run from her home, and I help her get to the charity shops and auctions to stock her online store. However, I have also had to help her with a lot of accounting things. If you are thinking about starting a business or helping a loved one, you need to check out these accounting ideas and tips.