Hi,
I have some saving in my account. And i am paying more tax in the last 2 years due to my salary plus interest earnt
My friend suggested i buy an investment property and borrow as much as i can and do negative gearing.
He said with this method, rather than paying government, you will just get an investment property and pay your investment property instead
May i know other people’s opinion
Thanks
before Thatcher and Reagan the top tax bracket was over 80%
that would be a decent start.
though in Australia it was never that high.
1951 it was 75% in Australia. but 60% by the 80s.
I'm sure there are apartments in St Kilda or Parramatta that will be substantially negative geared. It's a great way to pay less tax by having less money!
Maybe see a financial planner. If you’re upset with a bit of tax on cash interest, wait until you pay capital gains tax on the investment property your friend is suggesting you buy.
Put ALL your money to Sydney winning the AFL. Thank me later.
I'd put all of yours on Sydney, and some of mine on Lions. By 11-17 points.
nice tip, il put $20 now.
I wouldn't bet, it's too close to call
Carn the Swannies! Afl was a teenage thing and I was there for the gf lose and win. But this yr I'll watch as I'm in the mood for cheering to the least rapey and controversial team in afl!
If that is a demonstration of your friends financial acumen then I would not listen to a word he/she says.
Sounds like you have too much income. Sell your shares and buy a hotdog stand, get some teenagers to run it, you get free hot dogs. It's where the smart money is.
hotdog stand
Everyone knows the real money is in the frozen banana stand.
borrow as much as i can
Worst advice, I think you should get a new friend.
Try a different investment vehicle.
A vehicle you say? For investment? OP should look no further than a high yield AMG.
No need to fuss around with negative gearing, and you get guaranteed returns.
My friend who works at Westpac gave me the advice so you know it's legit.
/s
For small amounts, do voluntary contributions into super. You get money back from tax refunds and get to boost your super amount.
You’re paying tax for a good cause, for equality and justice.
Being someone who’s got good savings and good income, you should share it with others less fortunate and needy.
Don’t be a stooge.
Needs more caps
Silly boy
I can't comment on your situation but using negative gearing to "save" tax money is a false economy.
You are basically losing a dollar to save 30c or whatever your marginal rate is. You are then banking on capital gain which is by no means guaranteed and then get the bonus of the headache of dealing with a lease, renters, maintenance etc.
If you have interest in property and have a good investment plan, by all means go for it, but I can't think of a worse advice then to "buy a property to save tax" - it's not 2015 any more, you can't just buy any property and expect it to double in 10 years
It's not 2000 or 2008 or 2015 hmm
i'm not a property doomsayer and have a lot of skin in the game but you have to be realistic that it's a very different economic environment today you'd be lucky to get as much CG as we did in the last 10 years post GFC
I'd agree. Property is highly inflated post covid and with different levels of government all focusing on reducing cost of living and/or investing in public housing and councils increasing density to fit in more homes, I reckon the high growth rate seen before won't eventuate any time soon I see the market stagnating over the next 5-10 years with pockets of growth if you invest in the right area.
If I was putting money anywhere at the moment it'd be in stocks, but I'd be waiting for weaknesses, potentially wait to find out the American election result. Might be a bit of a drop in the market if Trump loses.
Such an obvious troll post.
I’m an accountant and tax agent and the best way to minimise tax is going to be different for each person but I saw someone mention salary sacrifice into super and I’d have to agree that’s the ‘easiest’ option for most people.
Depending on how much you've put into super in the last 5 years you may have some unused concessional contributions (under the annual cap) you can take advantage of: https://www.ato.gov.au/individuals-and-families/super-for-in…
The rolling 5 year cap can be helpful if you've paid less than tghe cap amount in the last 5 years
what did your qualified tax accountant or financial planner say when you ask them?
Post on OzBargain? ;-)
As an accountant and tax agent I make the same offer to all of my clients; if you want to pay less tax, I'll issue you an invoice, you pay it, and I will pay the tax for you. To get a tax deduction you need to have spent 100%, and at best, you'll get 47% back, meaning, best case scenario you are 53% worse off than before the expense.
Negative gearing just means you are able to offset the net losses from your investment against other taxable income. You're still far better off making more money and paying more tax.
Whether you are better off buying an investment property or keeping it in cash is dependent upon your situation, however do not go chasing deductions just to get a refund, or if you are, please see my offer above
Housing is a rubbish investment option, what happens when the cronies get annihilated in the next elections? housing will plummet and crash. what returns do you make withinterest payments so high?
if you want nice returns and don't have expertise to start a business, invest in ETFs
This is a cromulent post. As a tax adviser, I do love everyone's differing angles on how tax works!
Nice try ATO
Open an account in someone else's name and THEY will have to pay the tax.
But make sure it is a friend because eventually you will want (them) to withdraw the money. A good friend. A very good friend. Someone who then used to be a friend.
But more seriously cash in the bank should be a short-term option. Property would be better but ideally held longer term to offset the fees associated with buying, selling and maintaining.
blue chips investment
For every dollar you claim against your tax, the best scenario is you spend 60c to save 40c on your tax bill.
Getting something negative geared just to save tax is the dumbest fallacy pushed by the property industry.
To be clear, I’m not saying property can’t/wont make money just to not purposely NG one.
I know several people who have done very nicely from negative gearing property and they sold for more than double what they paid for the properties and after claiming depreciation and a 50% discount on the capital gains they were still well in front after paying the interest, CGT etc. Its all about timing though as they were lucky to invest in growing markets and chose property close to university's and public transport that were in demand.
How much more money could they have made with a positively/neutrally geared one?
Negative gearing was meant as a safety net, not the goal. There’s plenty of stories of people taking losses over years and then selling at a loss, all to ‘save tax’.
Who knows but i'm just saying there are people who the negative gearing strategy works well for. I don't think they would have considered buying 4 investment properties had it not been for the negative gearing appeal which worked for them as high income earners.
@mdw000: I’m sure it does, for those informed. If you need to ask ozbargain for an investment strategy, it’s not for you. Especially when the tax reduction component is more about loss mitigation, than reducing tax spent.
Lol
Pay the tax and move on to creating an financial plan to grow your wealth (without over focusing on the tax part)
noting the OP has not responded since yesterday morning, and from language of the OP I'm guessing this is a one-and-done post not worth my time
but anyway 'don't let the tax tail wag the dog' - if you pay tax it means you are getting income so be grateful you have an income - no tax suggests no job - unemployed->happy ? Probably not so much if no money honey.
if your level of investment knowledge is keeping the majority of your investment as cash in the bank, this is typically a bad idea as inflation averaging 3.5%pa means even if you get 5.5%pa bank interest that's net 2%pa after inflation - not gonna get rich that way.
Some figures I saw in an email about my share investments this morning showed last 1-year growth figures of 61%, 57%, 38%, 21%, and one ETF was up 47%.
So if you want better returns, get your cash out of banks and into some growth investments.
Dunno your age, income or financial or family commitments, but buying real estate requires steady income (gov't job?) and long-term commitment due to the very high entry and exit costs - dunno say 5% each way - so if in Perth and you buy a let's say $600K rental property and borrow 80% then you might need 25% (including stamp duty and conveyancing costs) or $150K cash upfront to buy, and then say another $30-50K spare cash to cover periods of vacancy and repairs if major problems occur. Something like 80% of first-time property investors who DIY the rental management have problems, throw up their hands, sell at a loss, and say never again.
Oh yeah - and when you sell there's this thing called Capital Gains Tax - that can be 25% of the entire growth you thought you were getting after holding the property for some time (more than a year - otherwise make that 50% tax)
So … not so easy as saying 'Just Do It' … ? ;-)
work less? Life is short.
How much we talking about roughly here? Because for you to say “paying too much tax due to interest earnt” means you have hundreds of thousands of $ in your accounts… if that is the case you should look into other investments as your millions in cash would depreciate hard with inflation.
Talk to an accountant or friend who knows about these investments or a financial planner. Those consulting costs are tax deductible afaik so the money you say you pay for ato can be saved atleast on some advice :-)
Lol.
U clearly knew u paying extra tax due to interest earned.
U are not paying extra tax for nothing.
So yes u don't want extra $$ in your pocket every mth from interest then u don't go put your money in savings acct just leave it in your transaction acct where most banks don't pay interest or only 0.1%.
People who are saying "NO PROFIT = NO TAX" are not looking at the full picture. If you just base your expected return on income - expenses. It's almost always a shit investment.
You can buy a near new 2bed apartment in Parramatta for 600-700k. Lease it for $700-$800. The rent barely covers the interest. If you include other costs like council rates, maintenance, strata, etc. You're making a loss of about $5k a year. Sounds like a shit deal.
The reason why it works is because the ATO allows negative gearing and depreciation. Suppose that apartment has a build cost of $500k, which can be depreciated over 40 years at $12.5k/yr. You can claim this 12..5k on top of the $5k as an expense. For someone earning over $200k paying 47% tax, they just saved $8k in taxes.
All of a sudden, it's gone from a 5k loss to a $3k profit.
Still doesn't sound much? Think about how much the property market has increased in the last 20 years. Sell it after 10 years and you could make another 200k more.
It's just an example, and nothing is risk free so always do your own research. It depends on your own circumstances. Someone earning $200k/yr is able to take full advantage of the negative gearing at 47%, whereas someone on $45k can only do it at 18%.
The aim is to earn less than $18k a year and pay no tax, or do what smart people do and seek proper financial advice by paying for it.
If your tax has gone up then you are making more money through income and interest. Your still earning a higher % than the extra bit of tax so your still better off. Depending on your savings try a fixed term investment to earn even more. Unless your paying over 100k in tax investment properties are rediculously expensive now and a pain in the arse with bad tenants and expensive repairs.
Park it in someone’s offset that you really really trust
They can pay you interest in cash
Assume you realise we already have a system whereby the more you earn, the higher the tax rate you pay?. Would be useful if you could define what you think "the riches fair share" is, as a generic call to "tax the rich" doesn't really mean much.