Ingredients Of A Good Financial Plan – Part 6 Tax
MBA, BSc, DipFP
Financial Planner / Managing Partner
Ingredients Of A Good Financial Plan – Tax
“Nothing is certain but death and taxes”
That may be true, but the amount of tax you pay doesn’t have to be an unavoidable burden. Developing an effective tax strategy is another important pillar of a well-structured Financial Plan. In our penultimate article on The Ingredients of a Financial Plan, we look at what an effective tax strategy might include, and why it is important to your financial health.
Objectives Of A Tax Strategy
There are three key objectives in a tax strategy:
- Reducing your tax burden
- Managing the amount and timing of your tax to enhance your cash flow position
- Reduce cash leakage through effective structuring of income and debt
Any decision you make about your tax strategy should be done with your overall financial picture in mind, with the ultimate outcome an increase in what’s in your back pocket.
Minimising Your Tax
How you structure your tax strategy is dependent on your overall financial position. There are, however, some broad areas you should look at:
Superannuation – Whether you make salary sacrifice or voluntary personal contributions, superannuation is a highly effective way to reduce your tax burden, whilst at the same time saving for the future. Check out our article Superannuation for more information.
Deductions – It might seem obvious, but making sure you are claiming all the deductions you are entitled to can have a big impact on your tax bill.
Negative Gearing – Long-term investing using borrowed funds provides the opportunity to negatively gear your investment, thereby reducing tax
Loan Restructuring – the tax implications on investment loans can mean you can save money if you are careful about the way you structure your borrowing.
SMSF – Setting up a SMSF and transferring or purchasing assets through this fund will mean your assets are taxed at a lower rate. Our article on SMSF will help you determine if this is something that would suit you.
Family Trusts – Setting up a family trust, or a company structure can mean some aspects of your income may be taxed at a lower rate.
Salary Packaging – if you are in a position to do so it can be tax effective to package things like your car and laptop as part of your salary.
Get The Right Advice
Whether you are a small business owner or on a salary, getting the right tax advice is the best place to start. A good financial planner will be able to help devise the best strategy for your personal circumstances.
Who Said It First
In case you were wondering, the saying “Nothing is certain but death and taxes” is often wrongly attributed to either Mark Twain or Benjamin Franklin. But it was originally used in 1716 by Christopher Bullock. Which just goes to show how long people have been complaining about paying taxes!
Manly Financial Services has many years’ experience in developing efficient tax strategies for individuals and businesses. If you would like advice on how to minimise your tax and maximise your financial position, give us a call on (02) 9976 3388, or click below and we will be in touch shortly.Interested in knowing more?