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Monthly Archives: April 2018

Trust Distributions – Who can you distribute to?

If you are a small business who uses a Trust, there are a number of people that you can distribute to with a Discretionary Trust. These include:
– Children
– Parents
– Parents-in-law
– Brothers & Sisters
– Grandparents
– Grandchildren Children & Grandchildren You can distribute only $416 to children who are minors. That might not seem like a lot, but if you have 3 children and you are in the 47% tax rate, that works to being $586.56 in tax savings. If you have children who are over 18 and are studying at University, or are not really earning an income, you can distribute up to $20,542, and they will not pay any tax. At the 47% tax rate, that is $9,655 in tax savings. If we increase that to $37,000, they will have to pay $3,456 in tax and your net tax savings will be $13,934. Brothers & Sisters If you have brothers and sisters who are studying at University, or are not really earning an income, you can also distribute to them in a similar fashion as demonstrated above. Just make sure no one else is doing the same thing!! Parents, Parents-in-law & Grandparents If you have parents, parents-in-law and/or grandparents who are self-funded, you might be able to distribute to them in a tax effective manner. How do you take advantage of this? You need to have a Discretionary Trust with income, and you need to be a small business. FAQ’s Do I need to pay the distribution? Yes, you will need to pay the distribution. What if they receive Centrelink? If the people you are looking to distribute to receive Centrelink, then this strategy is unlikely to work for you.

Tax Planning 2018 – It Starts NOW!

What would you do with an extra $10,000? On average, we save more than this for our small business clients every year in tax. The reason we are able to do this, is because we help them plan ahead before the 30th June. Last year, we were able to help our clients save over $1,000,000 in tax. So, over the coming weeks, we will be listing a number of strategies to help you reduce your tax legally. Why? If you 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 2018, start planning ahead to save tax. How to plan to save tax with PCR’s help? Our process works as follows: First of all, we request details of your expected income and business profits for the 2018 tax year (1 July 2017 to 30 June 2018). 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 2018. 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. Thirdly, 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. Finally, we provide you with an easy-to-follow Action Plan, to ensure that both you and us can do everything that needs to be actioned prior to 30th June. So, over the next few weeks, keep an eye out for our tax planning strategies. They can help you save more for your family’s wealth creation.

Do not let yourself get scammed

Every year, scams cost Australian citizens, businesses, and the economy hundreds of millions of dollars, and have the ability to cause emotional harm to victims and their families. The best way to protect yourself is through awareness and education. Therefore – the Australian Competition and Consumer Commission (ACCC) is providing us with ‘The Little Black Book of Scams’. We are sharing this terrific little publication with you to help protect your financial well-being, and so you can spot, avoid, and protect yourself against scams.

Age Pension and the Superannuation Sweet Spot?

What am I talking about? I will try and provide a very simple explanation. The “Superannuation Sweet Spot” is recent terminology referring to the amount of money a person or couple needs to have saved in superannuation to ensure they achieve a reasonable level of income while maximizing their age pension. There have been many articles written in the press concerning this matter with suggestions that an amount of approximately $300,000 in superannuation for a single person who owns their home is sufficient, and $400,000 in superannuation for a couple who own their own home is more than adequate. Viewing the situation on the following table may give you a better idea: Situation Superannuation Drawdown from Super Age Pension Total Income Single Home-owner $300,000 $15,000 $19,210 $34,212 Couple Home-owner $400,000 $20,000 $33,272 $53,272 Now the argument, rightly or wrongly, is that if you can achieve these levels of income in partnership with the age pension, what is the incentive to save and contribute any more to superannuation? For example, to ensure that you maintain a similar income without the age pension you need to have the following amounts in superannuation –  Single homeowner – $684,240
 Couple homeowner – $1,065,440 This assumes the minimum level of income (5% between the ages of 65 and 74) is being drawn from super. So, to a certain extent I can understand – what is the incentive for me to save and sacrifice more of my salary into superannuation if as a couple, I can retire now, wait a couple of years, apply for the age pension and have an income of $53,272 tax-free per annum? Let me run through a couple of very simple reasons:  My Comfortable Retirement – the blog I wrote a couple of weeks ago. If you read this blog, I am sure you will agree $400,000 and an income of $53,272 per annum will certainly not be sufficient for me to achieve all I want in my retirement  Secondly, my wonderful partner, Donna, is a couple of years younger than myself, 4 and a half years to be precise, and it means that my plans of applying for the age pension would need to be deferred until she reaches the age of 67 – 10 years from now.  Thirdly, from a health perspective, if I do wait five years after I retire for Donna to retire and become eligible for the age pension, I am sure I would become extremely bored and drink a lot more wine than my doctor says is advisable.  Finally, as we have seen on numerous occasions over the years just like superannuation, the legislation surrounding the payment of age pension is constantly changing, meaning that to some extent my cash flow would be subject to change on a regular basis as well Qualifying for an age pension is not and should not be anyone’s financial or retirement objective. And no, just because you or I have worked all our lives and paid taxes does not mean that we should have an automatic right to the age pension. So, I firmly believe that when we talk about the “Superannuation Sweet Spot”, it should not be in the context of the ideal balance of funds a person needs to have saved in order to maximise the appropriate age pension entitlement to achieve their required cash flow. It should be in reference to a person maximizing their enjoyment in retirement. Now everyone’s idea of enjoyment in retirement will be different so I can only speak from my perspective. However, I do believe that the incentive for me and for everyone who works is to have enough superannuation to not have to rely on the safety net of an age pension. Why shortchange your retirement by not achieving all you can and all you want to, because someone tells you the income and assets means test associated with the age pension is a disincentive to a person building a substantial superannuation balance. I am certainly going to grow my superannuation balance as much as I am able over the next few years to ensure I can achieve “My Comfortable Retirement”. I will not shortchange my enjoyment in retirement by giving away assets or having as my retirement objectives compromised by only achieving my “Superannuation Sweet Spot” in order to qualify for an age pension. By Mark Teale