Tax Advice
If you are a high-income earner, it is a realistic and a practical idea to implement tax minimisation strategies. Tax avoidance and evasion on the other hand is illegal and attracts heavy penalties from the Australian Tax Office (ATO). These penalties can range from fines to imprisonment for more serious offences.
Legal tax minimisation strategies
Superannuation
Super is a tax-effective investment and one of the best ways to save for retirement. This is because the government provides tax incentives to save through super. These include:
- A tax rate of 15% on employer super contributions and salary sacrifice when you and your employer agree to pay a portion of your pre-tax salary as an additional contribution to your superannuation. This can be a tax-effective strategy and usually suits middle- to higher-income earners’ assistance if they’re below the $27,500 cap.
- A maximum tax rate of 15% on investment earnings in super and 10% for capital gains.
- No tax on withdrawals from super for most people over age 60.
- Tax-free investment earnings when you start a super pension.
Buying assets in your partner’s name
For this strategy to be effective, your partner must have a lower marginal tax rate than you do. In this way, the net income from the investment will be taxed at a lower tax rate.
Insurance bonds
Insurance bonds are investments offered by insurance companies. They can be tax effective if you’re planning to invest for 10 years and follow certain rules.
All earnings in an investment bond are taxed at the corporate tax rate of 30%. If no withdrawals are made in the first 10 years, no further tax is payable. They can be tax effective for investors with a marginal tax rate higher than 30%.
As insurance bonds are considered to be life policies from a legal perspective, they can provide important estate and asset protection benefits – see the estate planning and asset protection sections for more details.
Establish a discretionary trust to distribute business/investment income
This allows you to distribute the income to trust beneficiaries with lower marginal tax rates, therefore reducing your personal tax liability.
Trusts also have important asset protection benefits – see the asset protection section for more details.
Specialist investments
We have access to specialist investments that high income earners can utilise to reduce their
immediate tax liability, further diversify their investment portfolio, and have the ability to significantly enhance wealth creation.
When assessing a specialist investment, it is important to ensure that the underlying assets are
fundamentally sound, and not just part of a dodgy tax scheme. Before any such investments are
recommended, they are reviewed by our investment committee and a product ruling is obtained from the Australian Taxation Office (ATO) if available.
Please note that you should only choose investments based on your financial goals, risks you’re comfortable with and expected returns. Tax benefits should be a secondary consideration.
