Strategy for a high income earner?

Discussion in 'Investment Strategy' started by MartyMcFly, 22nd Oct, 2015.

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  1. mrdobalina

    mrdobalina Well-Known Member

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    there's more to life than working
    If I took this approach, my wealth would be significantly less than what it is now.
     
  2. The Falcon

    The Falcon Well-Known Member

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    Hard to argue with that. Glad it worked out for you :)
     
  3. mrdobalina

    mrdobalina Well-Known Member

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    Perhaps I should qualify my previous response. The 3 points I would challenge are:
    "- Max salary sacrifice (set up SMSF).
    - Get rid of your IPs ;)
    - ...holding LIC / ETF / Bond investments."

    For us, salary sacrificing into superannuation, even if its SMSF, would mean we wouldn't be able to access those funds until the traditional retirement age (65 or whatever it is). We've been able to retire in our mid-30's (about the same age as what MartyMcfly is now), as opposed to waiting another 30 years. This has been primarily on the back of investments in high growth property in the initial stages, then developing in the last few years, to generate more equity and a passive income stream of about $200k net after tax.

    I'm not sure we could have achieved that if we sold our IP's and invested in LIC/EFT/Bonds.
     
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  4. Bran

    Bran Well-Known Member

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    On the super topic, don't you lose the tax concession above a fairly low super contribution, like 30k? Does having a SMSF change this?

    I hit this ceiling with a 3% individual contribution, which is supplemented by my government employer (by I think 9%)?
     
  5. hobo

    hobo Well-Known Member

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    Yes, I believe the tax concession is only applicable to the first (depending on your age) $30,000 pa contributed, so any contributions over that in a FY fall into the "non-concessional contribution" category, which has a further limit of about $180,000.

    It is my understanding that having an SMSF does not change that - the same rules apply to all superannuation funds.

    Edit: Had some figures wrong/inconsistent so to keep them on topic, have changed them to be for FY 2015-16, and relevant to the OP's stated age (35). @Bran - yours may or may not be different.

    PS - I Am Not A Tax Expert. :D
     
    Last edited: 23rd Oct, 2015
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  6. Bran

    Bran Well-Known Member

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    Why is 90/10 bad enough to sell the share? Is it the later tax implications? We lose any upfront tax offsets doing this. Why buy more in her name, particularly if these are negative?
     
  7. twistedstats

    twistedstats Well-Known Member

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    Could you elaborate on why this is beneficial? Sure, corporations pay 30% tax but in the end, won't you pay your income tax bracket eventually when the company pays out the income?
     
  8. Terry_w

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

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    Like this
    Legal Tip 68: Avoid 99%/1% ownership of property https://propertychat.com.au/community/threads/legal-tip-68-avoid-99-1-ownership-of-property.3237/

    Ideally to remove yourself from the loan - reducing risk and improving serviceability. but if she is not working it may not be possible immediately to remove yourself from the loan, but could be later as her income picks up.

    One entirely in your wife's name could mean you divert funds into an offset account on this property and thereby divert income to her. With such a high income this should convert negative into postive quickly. in the meantime you can maximise negative gearing benefits on ones you own.

    Diverting capital to her means you can also borrow from her in the future.
    Legal Tip 38 Spousal and Related Party Loans https://propertychat.com.au/community/threads/legal-tip-38-spousal-and-related-party-loans.1872/

    Tax Tip 47: Spousal Loans as a Tax Strategy https://propertychat.com.au/community/threads/tax-tip-47-spousal-loans-as-a-tax-strategy.4452/
     
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  9. Terry_w

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

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  10. willy1111

    willy1111 Well-Known Member

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    @The Falcon I'm curious to know . . . if one was to hold LIC/ETF/Bond Investments and never sell the holdings, just hold for the income - so there would never be CGT . . . why would you not structure it the other way and hold the investments in a Company with a family trust as 100% Shareholder.

    That way it caps the tax on earnings at 30% just compound away for 10-15 years in the company and then when you wish to draw an income, pay out a fully franked dividend to the family trust and distribute amongst beneficiaries to minimize/split income tax.
     
  11. twistedstats

    twistedstats Well-Known Member

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    @Terry. Thanks. Your comment on Legal Tip 93 answers my question.

     
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  12. Graeme

    Graeme Well-Known Member

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    One of the best investments you can make is paying down your mortgage quickly.

    Borrowing currently costs about 5%. To get a better return, Marty would probably need 7.5% to 10% depending on how it was taxed. I believe that the expected total return from the stock market is around 7% these days, so you're going to have to take greater risks than a simple tracker fund.
     
  13. Bran

    Bran Well-Known Member

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    Thanks guys

    I posted this under a pseudonym, but it seems that everyone who knows me offline knows it was me anyway, so I'll let Marty rest in peace.

    This all suggests I need some external help, as I do not understand lots of these concepts.

    Terry clearly has a grasp of this stuff but sounds full, can anyone recommend a Brisbane based fee for service clever accountant?
     
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  14. Phantom

    Phantom Well-Known Member

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    What? Marty is Bran? No way. ....I'm shocked :D
     
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  15. The Falcon

    The Falcon Well-Known Member

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    Yep this is what you are doing with the bucket company beneficiary, as you describe above,I like trust first as you might want to hold CGT assets as well. Works either way though as long as you have a trust, a company and individual beneficiaries in the mix.
     
  16. Ted Varrick

    Ted Varrick Well-Known Member

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  17. Bran

    Bran Well-Known Member

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    This is 1 share? Wow.
    What does it return?
     
  18. Phantom

    Phantom Well-Known Member

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    Buy one share at market open - $202k. Sell at market close $205k. Profit for day = $3,000.

    Total work involved - two clicks of the mouse.

    :D:D:D
     
  19. D.T.

    D.T. Specialist Property Manager Business Member

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    Fixed for what happens the next day...
     
  20. Phantom

    Phantom Well-Known Member

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    Birkshire Hathaway 50% share price drop in one day? Even Warren is laughing!!