If only people paid as much attention to optimising their tax position as they do to worrying about a drop in the value of their investments!

Investments will always go up and down and no matter how much you feel that you should have “got out” before the downturn, just remember that if you can predict markets, you may as well give up the day job and give a sell-out, world investment lecture tour now.

With a far greater degree of certainty, you can structure your investment strategy to fully utilise tax offsets and grow your wealth. Simple things such as placing deposit accounts in the name of a lower income spouse are a start in the right direction.

Beyond this, much depends on your marginal (top) tax rate. In this article I will cover higher income earners. Next time, I will look at middle and lower income earners.

Some hints for those earning more than $80,000 per year:-

A) Salary sacrificing into superannuation, but not so that your taxable income falls below $34,000 per year.

B) Using negative gearing into property

C) Margin lending into shares and managed funds, (but quite frankly the interest rates charged are well above mortgage rates).
Consider instead of margin lending, borrowing against property to invest into shares and managed funds. Running a share portfolio alongside your property portfolio reduces overall risk if property falls and you need to sell to access cash.

D) If you are under 50, seriously consider using Imputation Bonds to build up your investments. They are taxed internally at 30% or less, but after 10 years, come out free of capital gains tax. But if you need the money, you can sell the investments at any time before 10 years. (Also great for those wishing to retire early, before age 55!)


E) Borrowing to purchase a property within superannuation, obtaining tax deductions as you go, with the added benefit of potentially being able to sell the property free of capital gains tax once aged 55.

Anna-Louise Brown (ASIC# 232 692) Certified Financial Planner, Authorised Representative, Madison Financial Group anna-louise@wealthbuild.com.au