How a millionaire pays no income tax

Discussion in 'Accounting & Tax' started by Redwing, 22nd Jun, 2019.

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  1. Redwing

    Redwing Well-Known Member

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    How a millionaire pays no income tax

    Meet Tony. He earns more than $1 million a year yet when it comes to tax time his taxable income is just $18,000 meaning he pays no income tax.

    How does he do it? Deductions.
     
  2. Marg4000

    Marg4000 Well-Known Member

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    The article states:

    “Tony is a big earner and a big giver. He has given $850,000, which he now claims on tax.”

    Tony is generous.
    Tony donates nearly 80% of his gross income to charities.

    Article continues:

    “This is one reason that Tony is in minority – 99 per cent of people who earned more than $1 million remained in the top tax bracket after deductions.”

    Marg
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    He donates most of it to charity, did he play rugby and run a go fund me page to fund a lawsuit?
     
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  4. Redwing

    Redwing Well-Known Member

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    Israel Folau, owner of a multimillion dollar property portfolio and until recently the highest-paid rugby player in the world, launched a campaign to have the public fund his aggressive legal campaign against Rugby Australia.

    The top six fundraising causes on GoFundMe.

    upload_2019-6-22_13-50-36.png
     
  5. skater

    skater Well-Known Member

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    Well, he's just a disgusting person. I don't know how people can support him. It's wrong! Just plain wrong!
     
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Wow people would rather help a multimillionaire Christian condemn gay people than save a kids life!
     
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  7. money

    money Well-Known Member

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    The article states: "Any donations to registered organisations – even a $2 coin dropped in a charity appeal bucket – can be claimed as a tax deduction."
    Don't you need a receipt from the charity to deduct that $2? I didn't think they would give you a receipt for $2 when you dropped a $2 coin into the bucket at a shopping centre. Maybe they do?

    The article states: “Tony is a big earner and a big giver. He has given $850,000, which he now claims on tax.”
    Is Tony able to setup his own charity and put that $850k in there and he somehow gets a benefit from the charity that he has setup? Expensive cars the charity buys and lets Tony drive, holidays around the world the charity let's Tony take, etc. Somehow I don't think Tony would be so generous just to give 85% of his income to another charity just because he's generous and has too much money.
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    What happened to the shane warn foundation?
     
  9. big_ben02

    big_ben02 Well-Known Member

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    These articles re millionaires paying no tax come out each year around this time. The articles usually talk about how the millionaire paid their accountant over $1m to pay no tax, however as was well documented during the recent election, those circumstances are usually as a result of an individual going through a tax dispute with the ATO and it is lawyers and barristers at 10 paces.

    The other thing to note is that a lot of these "millionaires" wouldn't be PAYG wage earners, but business owners who can control the level of income distributed by their business to them personally.

    I had a client who donated $800k to a charity. They had retained profits in their private company and so declared a dividend to fund the amount of the donation. They wouldn't normally have assessable income of $1m, but in this instance declared a dividend and then claimed the donation to reduce their taxable income back to under the highest marginal tax rate and then received a refund of the excess franking credits. In other years, they would only declare a dividend equal to their personal drawings and so in those years wouldn't be a so called "millionaire".
     
    Last edited: 22nd Jun, 2019
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  10. Scott No Mates

    Scott No Mates Well-Known Member

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    Yes, anyone can set up a charity and get tax deductible status (just have to jump through all of the hoops). Providing that the 'charity' distributes at least 30% of its income (IIRC), then it can maintain the tax deductible status. It can pay expenses etc (up to a limit) with an FBT exemption eg school fees, mortgage etc so that the $18k nett income soon becomes $X00,000 fax free.

    Couldn't turn a profit from the fund raising events it held so was losing money and couldn't distribute anything to charity - soon became non-compliant.
     
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  11. datto

    datto Well-Known Member

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    I'd like to start up a Save the Bogan Foundation. Give it 10 years and another property boom and they'll be out of the Druitt and up the coast with their cousins.
     
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  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You could employ your brother to run it, on a high salary, with car allowance of course.
     
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  13. datto

    datto Well-Known Member

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    Good idea. The admin costs could run a tad high though. Need a fleet of expensive Holden cars . Top of the range stuff.
     
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  14. Scott No Mates

    Scott No Mates Well-Known Member

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    They're all collectors editions now even a 1970's LJ Torana with a dodgy red block and triple SU's.
     
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  15. SatayKing

    SatayKing Well-Known Member

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    I recall reading what was purported to be an historical document set around 2000 years ago in which some dude was hanging out with 12 other dudes for a few years and..

    Hmm, best not go there.
     
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  16. qak

    qak Well-Known Member

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    From the article: "There were 70 people like Tony, who earned more than $1 million in total income, but lowered their income to less than $18,200 after deductions. That meant they didn’t have to pay any income tax."

    Then: "Among the Tonys, the average personal superannuation contribution was $557,500."

    And: "Tony spent $50,000 on managing his tax in 2016/17, far more than the typical Australian but far below the average for his cohort ... their average costs of managing tax were a staggering $607,201"

    Interesting numbers!
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    the article is implying milionares can make a super contribution of $557k and deduct it!
     
  18. Scott No Mates

    Scott No Mates Well-Known Member

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    Is that a 3 year brought forward after tax contribution? Or was it due to the sale of a business and rolled into super or an allowance for downsizing be or some other benefit available for the over 60's?
     
  19. TSK

    TSK Well-Known Member

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    I would love to know which charities these are....
     
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  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    No the after tax contributions are not deductible.