Tax Planning & Advice

How you can pay less tax

You work hard for your salary. So wouldn’t it be great to legally pay less to the taxman? Just imagine what you could do with that extra money.

But tax rules are complex and can change over time. You don’t just need an expert understanding of the tax system, but also how the rules apply to your particular situation.

Don’t pay more tax than you should.

At Spectrum, we can help you reduce your tax bill legitimately, using several legal strategies including:

Structuring – which minimises tax and protects your investment assets

Using losses to reduce capital gains tax

Deferring asset sales to manage capital gains tax

Prepaying 12 months of income protection insurance premiums

Prepaying 12 months of interest on an investment loan

Using a tax instalment variation – which increases cashflow for negatively geared investments

Wondering how these strategies can reduce your taxable income? Read the case studies below.

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

How we got Mary a $13,818 tax saving

The problem

Mary was on a good income, paying tax at the top marginal rate (45%). However, she was planning to take maternity leave in the next financial year. While this would reduce her marginal tax rate to between 0% – 19%, it would also mean a big drop in income. 

Mary wanted to boost her savings, so she planned to sell an asset for $37,000 profit. She also owned an investment property (paid for with a $400,000 mortgage) and a share portfolio (carrying a $10,000 loss).

However, selling the asset would mean a $16,650 capital gains tax bill ($37,000 x Mary’s marginal rate of 45%). Understandably, Mary wanted to reduce that bill, so she contacted Spectrum for help. 

Our solution

We considered multiple scenarios before giving Mary her options:

  • Selling both the asset and the shares in the then-financial year:
    • Mary’s tax bill would then be ($37,000 – $10,000) x 45% = $12,150
    • This would result in a tax saving of $4,500
  • Selling the asset in the then-financial year and using $26,000 of the proceeds to prepay 12 months of interest in advance on her property investment:
    • Mary’s tax bill would then be ($37,000 – $26,000) x 45% = $4,950
    • This would result in a tax saving of $11,700
    • As an added bonus, Mary would have no loan repayments due while she was on maternity leave
  • Selling the asset in the following financial year:
    • Mary’s tax bill would then be $3,515
    • This would result in a tax saving of $13,135
    • As an added bonus, the due date for payment of the tax would be delayed by a year (post-maternity leave)

How we helped Joseph use negative gearing to best advantage

The problem

Joseph was an Australian pilot working in Singapore. As he’d worked and lived overseas for several years, the ATO had classed him as a non-resident for tax purposes. 

This change in tax status had thrown Joseph. He had recently bought an investment property that, despite being tenanted, was costing him more than he was making in rental income (i.e. it was negatively geared). He was worried that being a non-resident would impact the tax benefits of being negatively geared. 

Joseph was wondering if he should cut his losses and sell the property. So he turned to Spectrum for help.

Our solution

We advised Joseph that holding onto the investment property would be better for his tax position than selling it. 

That’s because Joseph, as a non-resident, didn’t need to pay Australian tax on his salary. However, he did need to declare any income he made in Australia ‒ which, in this case, was the rental income from his investment property. 

Joseph could offset this rental income by deducting any expenses incurred in holding the investment property (e.g. mortgage interest payments, depreciation, repairs and maintenance, insurance and property management fees). Because the property was negatively geared, the end result was a tax loss on his income return. 

Joseph could then carry this tax loss over each year, and offset it against future Australian income. So if Joseph waited a few years to sell his property, any capital gain he made would be offset by these carried-forward losses – reducing his tax bill. 

The table to the right shows how this strategy could result in big tax savings.

How Joseph can save $24,187 on capital gains tax

Tax Benifits Example

Estimated capital gain Joseph makes when he sells investment property $100,000
Less: 50% Discount on capital gain as held for more than 12 months ($50,000)
Taxable capital gain for tax purposes $50,000
Less: Rental property loss – 2020  ($10,000)
Less: Rental property loss – 2021  ($10,000)
Less: Rental property loss – 2022  ($10,000)
Less: Rental property loss – 2023 ($10,000)
Net gain on which tax will be paid $10,000

Want to reduce your tax and boost your disposable income?