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How would you like to legally reduce your tax by $500 or $1,000 or $5,000 or more?

Here's how to do it:

The Strategy behind Tax Planning

The tax you pay depends on your taxable income (all assessable income less allowable tax deductions), and the tax rates that apply to that income.

Therefore, your tax is reduced if you:

1. Reduce your income, or

2. Increase your tax deductions.

Seeing we all want to earn more, reducing your income isn't an option! But increasing your tax deductions definitely is. Below we have given you a link to 2 Tax Planning Flyers which both list a number of items that could be claimed as tax deductions. Use these as a guide, but please CONTACT US if you have any questions or uncertainties regarding this.

To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase forward and buy it in June. You then get the tax deduction this year, and not next year.

Warning: Don't fall into the trap of buying something simply to get the tax deduction for it. If your tax rate (including Medicare Levy) is for example 34%, you would only get 34% of the purchase price back as a tax refund (or reduced tax payable) from a tax deductible item. You DON'T get 100% of the amount that you spend back as a tax refund (or reduced tax payable).

But if you do need an item for your business or your work and it is tax deductible, we recommend buying it BEFORE 30 June so that you get the tax deduction this year.

Your Tax Planning Strategy Checklists

Business Owners: Click Here for our Tax Planning Flyer for Business Owners.

Individuals: Click Here for our Tax Planning Flyer for Individuals.

If you are a business owner, please note that we will review BOTH the Business Owner's Flyer and the Individual Flyer because both of these apply to you.

Help us to help YOU!

If you spend a little bit of time with us to review your financial situation and discuss your tax planning options, you could end up saving yourself thousands of dollars.

Now's the time to do it - please contact our office TODAY to get started

If you have a Family Trust (also known as a Discretionary Trust) YOU NEED TO READ THIS!

From the 2011/12 financial year, Trustees who distribute the income of a Trust through a resolution to beneficiaries must do so BEFORE the end of the financial year (June 30) for the resolution to be effective in determining who is to be assessed on the Trust's income.

If a Trustee fails to make a resolution to appoint the income of the Trust before the end of the financial year, the Trustee may be assessed by the ATO on the Trust income at the highest marginal tax rate (i.e. 45%), rather than the intended beneficiary(s).

Before 2012, the ATO allowed a certain amount of discretion as to when a resolution could be prepared.

However, the ATO now takes the view that following the decision in Colonial First State Investments v FC of T 2011 ATC 20-235, trustees must now resolve to distribute the current year's income on or before year end to ensure the beneficiary is presently entitled to trust income.

What You Need to Do

You need to provide us with a Profit & Loss Statement for each Family Trust that you have for the period 1 July 2014 to 31 March 2015. You also need to send us details of all income earned by all family members during the period 1 July 2014 to 31 March 2015, and your estimated income for the period 1 April 2015 to 30 June 2015, including any capital gains.

We will then review all options for you, and recommend the most tax effective manner to distribute your Family Trust profits. We will then prepare the appropriate Trust Distribution Resolution for you to sign before 30 June 2015.

Contact our office TODAY if you have any questions regarding this information.

Your action now may save you thousands of dollars of unnecessary tax payments!

This is one of my personal favourites. Debt optimisation (sometimes referred to as "Debt Recycling") is a financial strategy which creates wealth over time and improves an individual's debt structure. Achieved, in the majority of cases by:

- Using all surplus income to reduce the home loan (non-tax deductible "bad debt");

- Creating or increasing investment debt (tax deductible "good debt"), by drawing against equity in the home; and

- Using this borrowed money to build an investment portfolio.

It is a great strategy that can be adapted to suit your goals and time horizons. Though, it is important to note that borrowing money to invest and budgeting are key components.

Here is an example of how the assets and cash flow involved in a debt optimisation strategy using a "split loan":

Where suitable, it is possible to extend on the strategy above by using the newly created investments as security for a margin loan, with the proceeds used to further invest. In this type of strategy the interest costs are still generally met from the home loan, with investment income also used to reduce the home loan balance.

Your Action Plan

Contact the Preston Coe & Ring team TODAY for a FREE review of your current loans and advice on whether you would benefit from a Debt Optimisation strategy!

Apart from the usual general tax planning strategies (eg. incur business expenses prior to 30 June to claim a tax deduction this financial year), there are only 2 main ways to reduce your tax:

1. Increase superannuation contributions; and

2. Prepay interest on borrowings for investments before 30 June.

This article will focus on this second item.

With interest rates low we have seen a significant amount of interest by investors looking to leverage back into the share market with the benefit of capital protection and tax efficiency.

This coupled with a reduction in volatility of shares and reduced borrowing costs have made share investments as attractive as ever.

Here's how this strategy works:

You borrow an amount (say $50,000) from the bank to purchase $50,000 of blue chip shares before 30 June. Some banks will lend you a further amount for you to use to immediately pay back to them to prepay interest on the original $50,000 loan for the next 12 months.

Assuming an interest rate of 8.5% and that your individual tax rate is 49%, using this strategy would result in a new tax deduction for you of $3,475. This would result in an additional TAX REFUND to you of $1,702.75.

You receive all dividends from the shares throughout the year.

You cannot lose your Capital!

If you use a borrowing product such as the Macquarie Geared Equities Investment, your shares are 100% protected. This means that if the share market goes down, you don't lose any capital. And your shares go up in value, you keep all of the upside.

This is ideal for investors who want to have share investments but who don't want to have any chance of losing their capital.

Here is a brief summary of the features of the Macquarie Geared Equity Investment (note that other protected share investments have similar features):

• 100% leveraged and capital protected via a Limited Recourse Loan

• Interest cost deductible up to benchmark RBA limit (currently 6.95% p.a.)

• Menu of around 80 ASX listed securities, ETF's, LIC's or pre-selected portfolios put together by Macquarie Research

• Full dividend and franking entitlements

• Terms ranging from 1 to 5 years

• Each security protected in its own right so no netting off winners and losers. Winners are kept and losers are handed back.

• Minimum investment $50,000 equities

Interest rates are dependent on the stocks chosen, the term of the investment, and the interest type (fixed or variable).

Your Action Plan

If you are looking for some tax relief by leveraging back into the share market, but want the added security of 100% capital protection, contact us TODAY and our highly qualified Financial Planning team will discuss your financial circumstances with you and provide you with a Statement of Advice tailored to your circumstances.

In summary, instead of paying some tax, you can use this money to prepay interest on a loan for shares with full 100% capital protection for the shares.

It's a great option to consider - contact Preston Coe & Ring TODAY to implement this strategy before 30 June and save tax!

Everyone is talking about SMSF's these days. Recent changes to the laws for operating SMSF's have in our opinion made them an option that every one of our clients need to consider.

Very simply, SMSF is a super fund that you fully control. You make all the investment choices - including shares, managed funds, property, and cash. SMSF's can borrow from a bank to purchase investments, but this opportunity might be limited.

Strategy

Choosing the right STRATEGY for your SMSF is the key.
One great strategy can be to purchase your business premise in your SMSF or purchasing an existing commercial property you own with your SMSF. Either strategy means that you can get your super money working for you now and save significant dollars.

Estate Planning

Another key reason for using a SMSF is that it gives you exact estate planning options. For example, you can nominate a specific dependent (spouse or child under 18) to receive your super benefit if you die. Unlike a Will, this cannot be contested.

Would you like NO TAX on your Investments?

Once you turn age 60, you can start to pay yourself a pension from your SMSF, and there is NO tax on income of the SMSF and NO tax on any capital gains.

This means you can gradually sell down assets (including property), held in your SMSF and pay NO TAX regardless of any capital gain you make.

We believe this is an absolutely fantastic outcome - and it's possibly far better than owning an investment property in your individual name or in a Family Trust.

Please contact our office TODAY and make a time to discuss your family's financial situation with our Financial Planning Team.

Your appointment with us may mean you have hundreds of thousands more in assets when you retire. What a difference that would make!

There are five key things that all business owners MUST consider RIGHT NOW. Three of them are brilliant wealth creation ideas. Please read on!

30 June isn’t far away!!

Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If we all leave your tax planning until the end of June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.

So for 2014, our invitation to you is to START NOW with your tax planning.

5 KEY TAX PLANNING STRATEGIES

Over the next few weeks, we will send you regular updates our 5 key tax planning strategies. These are:

1. Establish a Self-Managed Super Fund (SMSF) - How to make it your family's wealth VAULT and legally pay NIL tax at retirement.

2. Big tax refunds for prepaid interest for a capital protected investments (with NO cash required by 30 June).

3. Debt Optimisation & Pay off your home loan sooner, minimise non-deductible interest and maximise your tax deductions for investments.

4. Trust Distribution Resolutions needed BEFORE 30 June 2015 - or pay up to 49% tax on trust profits.

5. General tax planning strategies - Key items that mean $ in your pocket.

So keep an eye out over the next few weeks, and we'll outline in detail for you how to save $ and at the same time grow your family's wealth in a low-risk manner.

How our Tax Planning Process works

First of all, we request from you details of your expected income and business profits for the 2015 tax year (1 July 2014 to 30 June 2015). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make.

Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $100,000 for 2015.

Secondly, we discuss all of your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.

Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.

And finally, we provide you with an easy-to-follow Action Plan to ensure that both you and we can do everything that needs to be actioned before 30 June.

1. Protecting your wealth from unjust claims against a beneficiary

When you leave assets directly to your beneficiaries the assets immediately become available to any person who makes a claim against them. This includes their creditors if they are in financial difficulty, or an estranged spouse or other relatives if they are going through relationship troubles.

By setting up a testamentary trust, the assets benefit from a higher level of protection from such claims.

Each beneficiary will have the right to entirely by-pass the trust or only have some of the assets left in the trust and take some personally – if they wish.

2. Keeping your assets within your family line

When you leave all your assets directly to your spouse or partner, it is not ordinarily possible for you to ensure (“from the grave”) that your children are provided for – particularly if your spouse or partner remarries and has other children.

A testamentary trust can be used to give your spouse control over the annual income from the assets (and possibly some capital), but at the same time provide for the assets to ultimately pass to your children (and in turn your grandchildren, i.e. down your blood line).

3. Leaving assets to your kids at different stages over time

It is well accepted that giving a child a substantial sum of money at an early age is not wise. However, it is ordinarily difficult to prevent a child beneficiary getting their hands on an asset when they reach 18.

A testamentary trust can provide a high level of control and certainty as to when your children gain access to particular assets – and for what purpose.

It is possible to stagger the gifting of your assets over time (for example, when your children reach 21, 25, 30, etc), or to tie the release of your assets to particular events or uses. For example, it is possible to tie a gift to the purchase of a house, education or overseas travel.

4. Income flexibility – reduce as well as spread the burden of tax

When assets or money passes directly to one of your beneficiaries, all income earned from those assets or money becomes taxable income in the hands of that beneficiary.

If the assets or money passes to the trustee of a testamentary trust, the trustee can choose how to distribute that income from year to year. This enables the trustee to take advantage of the lower marginal rates of tax of one or more potential beneficiaries. (It provides the similar flexibility of a Family Discretionary Trust.)

5. Marginal rates of tax for kids – turn kids into adults for tax purposes

Income that is distributed to children under 18 from an ordinary trust is subject to the highest marginal tax rate of 45%, i.e. the child does not get the benefit of the tax-free threshold and the graduated marginal rates of tax.

However, children under 18 do qualify for these tax concessions on income that they receive from a testamentary trust.

This can potentially save a large amount of tax over the life of the testamentary trust, although care must be taken as to how the testamentary trust is administered, and how the income distributions to your children are recorded.

6. Capital gains tax and stamp duty flexibility

When you die and an asset passes directly to one of your beneficiaries, a transfer of all or part of that asset to another person will trigger CGT and stamp duty for that beneficiary. This is because the beneficiary has a “fixed interest” in the asset from the time of your death.

For example, if you have two children and each is given an equal share in two houses – and if they decide to take one house each – CGT and stamp duty will be triggered on 50% of each house. Leaving the assets in a testamentary trust can greatly reduce the cost of reconstructing entitlements under an Estate.

7. Reducing tax on your super

A testamentary trust can also deal with any super or life insurance proceeds payable on your death.
Without proper planning tax of up to 32% (usually 17%) may apply to the full value of your super pay out as a result of your death.

A testamentary trust will provide your Executors with the maximum flexibility to deal with any super paid to your Estate, so as to minimize taxes – as well as provide the other benefits set out above for your super money, i.e. wealth preservation, gradual succession, income flexibility, etc.

8. Reduced likelihood of claims against the Estate

When your assets are given “outright” to particular beneficiaries, it is relatively easy for a disgruntled beneficiary to prove they have not been adequately provided for.

However, a testamentary trust does not have a single beneficiary – but rather a range of “potential beneficiaries” – which can be structured to include a potentially disgruntled beneficiary. It then becomes more difficult for such a disgruntled beneficiary to bring a claim until the trust has been fully administered.

- Sam J Carbone
Barrister & Solicitor

Early March saw the release of the Intergenerational Report by Treasurer Joe Hockey, the fourth such report in the five-yearly series, projecting what Australia will look like forty years from now.

In brief, the report paints a bleak picture of Australia's population ageing, with rising debt and falling rate of economic growth, and the burden for future prosperity is falling increasingly on women and the elderly. Whilst some may argue the document is too weighted down with imagined economic assumptions to “begin a conversation with the Australian people”, it does provide some useful insight into predictions about our aging population.

By 2055, it is expected a population of 39.7 million will include close to 40,000 people aged over 100, an eight-fold increase compared to today, with the average life expectancy for males increasing almost 4 years to 95.5 and females increasing three years to 96.6, and the number of people aged over 65 expected to double. On the flip side, if immigration stagnates, there is anticipated to be less than three people aged 15-64 for every person aged over 65, with labour force participation for those over 65 anticipated to rise to 17.3% from 12.9% today.

As Pauline Vamos, CEO of the Association of Superannuation Funds of Australia (AFSA), noted, "Government finances will continue to be under pressure over the coming decades, and the best way to protect yourself against future policy changes is to start saving now for the retirement you want.”

Australians will not be able to rely on the pension to provide them with the retirement they imagine. The earlier you start preparing for retirement, the more options you have to set a course that suits you.

If you are ready to take the first step to sort out your finances, work out how much money you have now, how much you might have in the future and where it is coming from, call us now.

At PCR, we help you to Live Life by:

1. Understanding you (our client) better than anyone else.

2. Providing clarity and vision of your goals and how to achieve them.

3. Providing peace of mind that you are protected should something go wrong.

4. Maximising your cash flow by helping you be as efficient with your funds as possible.

We are committed to forming close partnerships with you, enabling us to understand your unique situation and customising the assistance we provide to suit your requirements.

Have you ever wondered how some businesses nail the “Best Place to Work For” awards? What are their secrets?

Employee engagement remains a challenge for most companies & businesses worldwide. Businesses that have the best employee engagement understand what matters to employees. An engaged employee will provide higher service, higher customer satisfaction, and increased sales thus leading to higher levels of profit!

What is Employee Engagement?

Employee engagement is the emotional commitment an employee has to his/her organization and its goals. An engaged employee works with passion and is deeply committed to the business. This level of emotional commitment means that an engaged employee actually cares and willingly works on behalf of the organization’s goals, not just for a paycheck or promotion.

As business owners, we all want to have engaged employees. Here are the top five commandments of employee engagement:

1. Clarity: As a leader, you must have clear expectations and a clear vision. Engaged employees understand the “why” in their jobs - what the organization’s goals are, why they are important, what they’re expected to achieve and how they can contribute to the organization. Communication is the key.

2. Credibility: Employees want to be proud of their jobs and the organization they belong to. Business leaders should preserve their business’ reputation and demonstrate the highest ethical standards. Create an atmosphere that fosters trust and your employees will believe in you.

3. Convey: Leaders should know how to provide feedback. Commit to an open and honest communication and learn how to share your thoughts with your employees. Good business leaders encourage positive and constructive feedback as well.

4. Culture: Promote a flexible and fun environment. Ever had a look at Google’s office? Google consistently ranks at the top of Fortune’s “Best Companies to Work For” because of their corporate culture, not only because they have an awesome workplace.

5. Consistency: Treat team engagement as high priority and not just a one-off event. Your efforts should be actively ongoing.

If you consider your employees as your asset, employee engagement should be a priority. Pursue it, implement it, and get engaged with your employees. As former Campbell’s Soup CEO, Doug Conant, once said, “To win in the marketplace you must first win in the workplace.”

“By failing to prepare, you are preparing to fail.” – Benjamin Franklin

Investing and saving at a young age isn’t always easy. In our consumer society, when we are young our priorities often lean towards buying the latest cars and gadgets, often leaving little money to invest. Some mistakenly believe that small investments or savings now will have little impact on our future. But investing and saving, as with anything in life, benefits greatly from an early start.

To get ahead in life, it is always better to start sooner rather than later, and here are just a few of the many reasons why.

Life Expectancy Increases Over Time

Life expectancy has increased dramatically. Fact is, the average life expectancy of a person born after the year 2000 is up to 30 years longer than those born last century. According to World Health Organisation, Australian men have the third highest life expectancy in the world, and women the sixth. You’ll need enough money invested for a retirement that may last 25 years or more.

Inflation

The fact is, today’s dollar will not buy you the same amount of goods and services in the future. Inflation continually eats away at your savings. Learn how to save and invest for long term goals and minimise the impact inflation will have on your plans for retirement.

The Power of Compounding

A millionaire’s best friend. Compounding is defined in Investopedia as: “the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings.” In simple terms, it means earning money from your money! Starting early is the key to taking advantage of compounding.

Time

Time is an investor’s greatest ally, as it allows to take greater risks, returns and regular reviews early. Time will also help you avoid having to take unnecessary risks closer to or even during retirement. This will also result in a better quality life, as there will be less worries and a greater nest egg to work with.

Be a step ahead of everyone else

Our blog’s title is an idiom worth adhering to. The earlier you begin saving and investing, the better your personal financial situation will be down the line. By starting young, you’re one step ahead of the game.

It’s never too early to start (the younger the better). The first step is always the hardest. To get something done is to begin, so just do it!

Stop thinking that you are too young to save and invest. Investing while you are young is one of the best decisions you can ever make. We’re here to help you make wise financial decisions and achieve financial peace of mind. Contact us and we’ll show you how you can benefit from a head start in life.

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Blog

General Tax Planning Strategies - Key Items that mean $ in your pocket

Trust Distribution Resolutions

Pay off your home loan sooner and maximise your tax deductions

Use Tax Money to pay for your Share Portfolio!

SMSF - Get your wealth working for you!

Tax Planning Starts Now!

8 Good Reasons To Have A Testamentary Will

Intergenerational Report - the Silver Lining

The Top Five C’s of Employee Engagement to Substantially Increase your Business Profit

The Early Bird Catches the Worm

“By failing to prepare, you are preparing to fail.” – Benjamin Franklin