We’re having a wonderful time catching up with all our lovely clients for tax planning and I am thrilled to see the great progress everyone has made during the current financial year. My head has been filled with tax planning strategies for business clients but I’ve also had the pleasure of meeting with quite a few individual tax payers looking to save some tax and get ahead. There are many strategies available and with this in mind, I have asked one of my preferred advisors, Simone Richardson from Henderson Matusch to share an example of a family she has assisted:
Saving tax – should be personal not just business.
All too often I see people working with their accountants to keep their businesses tax effective, claiming appropriate deductions, depreciation and having the right structures in place, but when it comes to their personal income they just pay whatever tax is applicable. You need to run your household like a business and start getting tax minimisation on the personal income side, as much as you do for your business.
Having an appropriate personal tax strategy can make such a difference. Let’s look at an example. Ian and Jan, a couple in their early 40’s with young kids, have a joint household personal taxable income of $103,298 that they pay tax on. (Ian: $70,000 Jan: $33,298). They’ve got a mortgage to pay off, kids to educate and a few other things like travel and renovations that are important to them, aside from being able to maintain a comfortable lifestyle now and in retirement. We have calculated that by continuing on their current path – by age 65 – Ian and Jan would have paid $877,650 in tax on their personal taxable income.
But by treating their household like a business and implementing a legal and logical tax minimisation strategy, Ian and Jan can reduce tax on their personal income to $549,979 by age 65. That’s a huge tax saving of $327,671 over the next 25 years (that’s not a typo!). How would you like to save that much tax? In addition, Ian and Jan have also been able to clear their mortgage, fund the goals important to them, and set themselves up nicely for retirement, achieving more lifestyle benefits now and in the future than they ever thought possible.
If you are interested in finding out more information or wondering whether this is something that you can benefit from, please contact the office. I have many clients who work with Henderson Matusch (in fact that’s how I came across them myself!) and have always been impressed by the professional service Simone and the team provides.