Tax Planning & Advice

Keep more of what you make

The tax you pay on your income can be legitimately minimised with an understanding of the tax system and how it applies to your situation.

Some of the strategies include:

Tax Structuring – minimising your tax and protecting your investment assets.

Using losses to reduce capital gains tax.

Deferring asset sales to manage capital gains tax.

Prepaying 12 months income protection insurance premiums.

Prepaying 12 months interest on an investment loan.

Tax instalment variation – increasing cash flow for negatively geared investments.

Professional Standards

Spectrum Tax Solutions Pty Ltd ACN 100 513 433 is a Chartered Accounting firm and a Registered Tax Agent with the Australian Taxation Office. Liability limited by a scheme approved under Professional Standards Legislation.

  • Case Study 1
  • Case Study 2

Minimising Capital Gains Tax

Mary is in the following situation:

She is paying tax at the top marginal rate, i.e. 47%.

She is taking maternity leave next year so her marginal tax rate will become 0% - 19%.

She is looking at selling an asset on which she has made a $37,000 taxable profit.

She also has shares which have decreased in value by $10,000.

She also owns an investment property which she paid for with a loan of $400,000.

Mary didn’t call Spectrum and sold the property during the current financial year.

AS A RESULT HER CAPITAL GAINS TAX BILL WAS:

$37,000 x 47% (Mary’s marginal rate) = $17,390

Alternatively Mary called Spectrum, who advised she had the following options:

  • Selling the asset in the following year. Mary’s Capital Gains Tax bill then becomes: $3,572 A saving of $13,818. In addition, the due date for payment of the tax is delayed by a year.
  • Selling the asset in the current year but also selling her shares. Mary’s Capital Gains Tax bill then becomes: ($37,000 – $10,000) x 47% = $12,690. A saving of $4,700.
  • Selling the asset in the current year and use the proceeds to prepay 12 months interest in advance on another property investment. Mary will have no loan commitments for the next financial year whilst she is on maternity leave. In addition the deductible interest can be offset against Mary’s Capital Gains Tax to reduce her current year tax liability by: ($37,000 – $26,000) x 47% = $5,170. A saving of $12,220.

Ex-Patriots

Joseph was an Australian pilot working in Singapore.

As Joseph had worked and lived overseas for a number of years the taxation office classed Joseph as a non-resident for taxation purposes. As a consequence of the change in tax residency Joseph is unsure of what tax benefits he could claim on a negatively geared investment property in Australia.

Being a non-resident Joseph needs to declare any income sourced in Australia, which means:

Joseph’s Singapore salary would not be subject to Australian tax.

Joseph would need to show his rental income in his tax return.

Joseph is then entitled to claim as deductions against this income all expenses (e.g. interest, rates, depreciation, building w/offs) incurred in running a rental property.

In the case of negatively geared properties the net result would be a tax loss from the property to include in the return. This loss is able to be carried forward each year until it is offset against Australian income. In this way any future capital gain made on the property will be reduced by the carried forward tax losses.

Tax Benifits Example

Gain made on sale of investment property in Australia $100,000
Less: Discount on capital gain as held for more than 12 months – 50% ($50,000)
Taxable Capital Gain for tax purposes $50,000
Less: Rental property loss – 2008  ($10,000)
Less: Rental property loss – 2009  ($10,000)
Less: Rental property loss – 2010  ($10,000)
Less: Rental property loss – 2011 ($10,000)
Net gain on which tax will be paid $10,000

Want to understand the tax system and how it applies to your situation?