Safeguard your success with early wealth protection planning – a proactive approach to securing assets, reducing risk, and preserving your financial future.
No single wealth protection strategy can provide complete protection, but a combination of various strategies can help you manage risks. Ensuring you have appropriate business and personal insurance coverage can help protect you from the effects of unforeseen events. You should also take steps to optimise the corporate structure and banking arrangements within your wealth portfolio to maximise wealth creation while minimising the potential risks to your assets.
Comprehensive estate planning should form a fundamental part of your wealth protection plan. This will ensure your financial legacy is maintained and transitioned according to your wishes while avoiding potential disputes, payment delays, or tax implications.
Separating assets and reducing risk exposure through appropriate corporate structures, such as ensuring capital appreciating assets are not owned in the same entity as a trading enterprise, is a crucial wealth protection measure.
A discretionary trust offers trustees wide discretion to determine whether distributions will be made to the beneficiaries. Trustees can add beneficiaries as needed. Beneficiaries of discretionary trusts have no interest in the trust property unless the trustee exercises its discretion to distribute to them.
These trusts give the trustees a wide scope in terms of distributing income and capital among the beneficiaries. Depending on their needs, they may want to adjust these distributions, or even terminate them altogether. This makes them a good option for those who want a certain amount of flexibility with how their assets are managed.
There are many considerations to take into account when considering a discretionary trust for your business or personal investments, but it’s an excellent method for maximising flexibility, control and privacy. For any high-net-worth individuals who want to pass their businesses on to the next generation, this structure is attractive because of its dual taxation and planning opportunities
Because there is no one-size-fits-all approach to tax planning, it’s important to discuss your personal circumstances with a qualified professional to determine the best course of action.
By reducing your taxable income and spending less on taxes, you’ll be able to keep more money in your pocket, ultimately contributing to your wealth protection goals. Tax is unavoidable. It affects every aspect of your personal finances—from income to investments, superannuation, home loans, assets, and the wealth you leave for future generations.
It is possible to take steps immediately to avoid paying unnecessary taxes at the end of the financial year. These tips may not be suitable for everyone but are worth considering as an overall financial strategy. Discuss them with a tax accountant if you are unsure.
If you are an employee, you may be able to claim a tax deduction for certain work-related expenses. To do so, you must have spent the money out of your own funds and not been reimbursed by your employer. The expenses must relate to your earnings as an employee; for example, if you travel to work every day, you may be able to claim the cost of public transportation as a deduction. Keep track of all expenses in case they are questioned by the ATO.
Expenses you may be able to claim:
You can minimise the CGT you pay by:
When people buy property together, they often register the title in both names. This is particularly common if the property is intended to be occupied by a couple or married persons.
When buying an investment property, it is possible to put the title in only one person’s name.
This can be advantageous if you are buying with a spouse or partner because capital gains tax is payable when you sell a property that is not your family home. Capital gains tax is calculated as part of your annual income in the year the gain is realised. If the property is in the name of the partner who has low or no income, less tax could be payable than if the income from the capital gain was shared with the partner with a higher income.
Negative gearing is when you make a loss on your investment. This can occur when the expenses of the asset are greater than the income derived from the asset. It is frequently used in relation to real estate investments, however, can also apply to any type of investment.
Negative gearing allows an individual to deduct their loss against other income, such as salary and wages. The Australian tax system operates on the basis that people pay tax on their personal income, less any deductions. This is similar to how business profits are taxed – that is, tax is levied on the net profit of a business, not its gross revenue.
When you buy a property or shares with the intention of holding them for some time and selling them at a higher price, it may make sense to have some negative gearing. This might mean paying more for the asset than you expect to get back from capital gains when you sell it. That’s because capital gains are taxable in Australia, but interest on loans isn’t. This means if your income is slightly lower than expected, it may still be worthwhile as long as the capital gain is larger than any paper loss resulting from negative gearing.
Some people might also find themselves unexpectedly in a loss position. If you incur higher expenses or lower returns than anticipated, your losses may be higher than you originally budgeted for.
Many non-tax factors drive people to gear property investment negatively – for example, perceptions about the advantages of negative gearing and a bias towards investing in ‘bricks and mortar’, especially under certain market conditions, both of which might be fuelled by advice from property investment advisers and the media. Of course, there may be other non-tax factors too – for example, community, social or family benefits.
Income Protection Insurance is designed to give you financial security in the event of a serious illness, injury, or disability with monthly income payments. You can usually choose how long you will need to wait before the benefit payments commence and how long they will be paid for. This wealth protection measure ensures that you have a stable source of income when you need it most.
If you are unable to work due to illness or injury, unfortunately everyday costs of living don’t stop, income protection allows you to receive a portion of your income to ensure you can still make ends meet and so you can focus on your recovery, not paying the bills.
The length of time you must wait to receive your “income” depends on the type of benefit and on how much you have paid into the policy. It may be as little as two weeks or as long as two years.
Every business, investment, and job opportunity is different, so you will need to work out which structure is best for you to operate or invest through. Is it a Company or a Trust, an Individual or a Partnership, or maybe even through your Self-Managed Super Fund? Choosing the correct structure is vital for wealth protection and minimizing your tax bill.
The tax rate that is applied to a taxable income amongst each entity differs considerably. The individual and the partnership is from 0% to 47%, the company rate is between 26% and 30%. The Trust rate is from 0% to 47%, and the Self-Managed Superfund is 15%
To reduce your tax liability, you should plan the timing of your income and expenses. This includes things like interest on savings accounts, dividends from shares and rent payments. If you receive income at different times over the course of the year, you may want to consider having more of it paid at a time when its value is greater. On the flip side, if you need to claim certain expenses at a certain time, there is a possibility that this could be claimed in advance.
Deferring income is one of the most common strategies for tax minimisation and is often undertaken by larger companies with stable cash flows. By deferring income, you can pay less tax in the current financial year and receive a smaller refund from the ATO. However, this process may affect your return next year as the money becomes due earlier. In addition, if you need to access the funds for business purposes before they are taxed, you risk paying additional tax if it’s withdrawn before 1 July.
When you reach your preservation age and retire, you can access your super to fund your retirement.
You can also access your super:
You don’t have to cash out your super just because you’ve reached a certain age, however, you need to check if the rules of your particular super fund specify otherwise.
Your preservation age is not the same as your pension age. Your preservation age is the age you must reach before you can access your super and depends on when you were born.
The tax payable on super benefits depends on a number of things, including:
Some super benefits have a tax-free component and a taxable component. The tax-free component generally includes:
ASFA estimates that the lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.
ASFA estimates that a modest lifestyle, which covers the basics, is mostly met by the Age Pension. They estimate the lump sum needed to support a modest lifestyle for a single or couple is $70,000.
However, this might not be enough for you, it is important to seek advice on this with a Financial Planner; the team at OakView Financial can sit down with you and work out your required balance to meet your retirement needs.
It’s fair to assume that the average Australian might hope to live comfortably, if not lavishly, in retirement.
The widely reported ASFA Retirement standard suggests couples can enjoy a ‘comfortable lifestyle’ on around $65,000 a year. It stands to reason then that a single person should be able to live more than comfortably on $60,000.
If $60,000 a year sounds like your kind of retirement, the next step is to work out how much super you will need to fund it. That’s where our expert team comes in.
The Association of Super Funds Australia (ASFA) latest report states the average superannuation balance required for a comfortable retirement is $640,000 for a couple and $545,000 for a single person. This assumes you will withdraw your superannuation as a lump sum and receive a part Age Pension.
However, the average superannuation balance of a 60–64-year-old Australian is $359,870 for men and $289,179 for women. This, unfortunately falls short of the required amount needed to live a comfortable retirement.
The good news is that you still have time to change these numbers; time in the market beats timing the market. By working with a Financial Planner, you can employ strategy’s to boost your superannuation so you can hit all your retirement goals and live that well-deserved comfortable retirement.
The transfer balance cap is a $1.7 million transfer balance cap on the amount of money you can shift into a super pension account. Excess amounts will need to remain in a super accumulation account or outside super, where earnings will be taxed. The interaction of the transfer balance cap with other income and investments can be complex, so we advise you to seek professional advice.
The $1.7 million cap applies to individuals, which means a couple could have up to $3.4 million in individual accounts. However, if a couple has one account between them in a single name, the $1.7 million limit applies.
The Department of Social Services reviews the eligibility for the Age Pension each year, increasing the upper limits to scale with inflation. Australian Parliament may also introduce policy changes to the limits, it is best to review your retirement strategy with your Financial Planner each year to ensure you are always taking advantage of the best outcome.
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Take the first step towards financial peace of mind. Fill in the contact form to receive your free consultation and start your journey towards a secure financial future.
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Disclaimer | FSG | Privacy | Cookies |
ABN: 89 629 420 391 | AFSL: 513068