Plan now to beat the taxman and increase your wealth.(Australia focused)

Ask yourself the question "what did I do last year to increase my
chances of retiring rich"?

Many of you no doubt found that time had again run away, you did
not sacrifice any extra into your fund, you may not have talked
early enough to your tax and financial advisors. Net result is
that the taxman may have got you again this year, don't you hate
that? How do I know? Well that is what I used to do before I
educated myself.

So what did I do?

This year, or last year now, we went to talk to our advisors
early, we saw that we were going to get hit by a $7k tax bill.
So we explored some options. Could we use Installment Warrants
to maximize our wealth and reduce our tax? After looking I found
that I was unhappy with the risk, not that Warrants are risky if
you know what you are doing, just I did not have that much
time left.

So we looked at some other options and came up with a tax
effective scheme. This time, as we already have some Timber
in our super we went for Almonds. The other choice was Olive
oil, but we preferred to go the almond route. This meant we
had to pay out $12k with some ongoing maintenance into the
future. But that I was happy with. So to cut it short we
paid $12k into a tax effective scheme which reduced our tax
by $7k, therefore a real risk $5k.

Now some people would say but is that not spending a dollar to
save 50 cents? Well if all else fails that is exactly what
it is. But remember Super is long term and the return on the
investment over time should be very good and the fund has
enough to be able to do this.

And for us risking $5k (the investment less what we would
have had to pay in tax) for a potential return of about
$25 over ten years is a good risk for us. It is all,
however, down to what your objective and risk strategies
are. It would not necessarily have been a good thing
to do if you were two years from retirement.

Hopefully we will be able prove wrong that old saying
"money does not grown on trees" - but only time will tell.

So how can that help YOU? (Start Planning now - HINT)

Well if like a lot of people you did not do this type of
planning and left it all until it was too late, maybe just
maybe it is now time to start planning. Not just for your
super fund but all your finance. What I have come to
understand is that if you can do this now you will be in
much better shape for the future. Why? It is better to
plan and then act. The more planning you can do now the
more time you have for action later.

What does this really mean? Well dollars. Lets look at
an example. If you did some standard wealth creation
things. 1. Bought a negative geared property and
2. Sacrificed some money into your super.

If you set out your new plan to do these now you could:

1. Have some time to do the right research and buy a property
in the next 3 months when prices are seasonally low because
its winter.
2. Benefit a bit from there being fewer buyers about so you may,
and I use the word may, get a bit more service from the
real estate agents brokers and bank mangers.
3. Gain all the depreciation for this year.
4. Prepay the interest for this year and 12 months into
next year.

With your salary sacrifice you could:
1. Arrange to pay an amount each month into your super out
of your salary up to your limit.
2. If you own your own business arrange to pay your salary
sacrifice out prior to tax.

In both of the above examples you could then fill in a tax
variationform This is available from the ATO website or your
tax advisor. See below...

For those of you who do not know, (and a lot of people don't)
this allows you to vary your tax via payroll so you get
your tax rebates back via your salaray/wage throughout
the year, aiding you cash flow and astonishing your
payroll department!!

Now the above is not advice it is only information - Again it is an
example of what I did when I was still in full employment. I took
advice, we planned and then we acted.

I know a lot, and I mean a lot, of people who earn only the average
wage, $42k, but pay no tax! That is the same as earning about $75k
and paying full tax. Now who would you back to retire rich? The
person who earns $75k, maybe through working harder, extra hours
and extra courses, or the person who invested a little time
planning on $42k, who has 2 investment properties and an actively
growing DIY Super? There is no right or wrong answer here, it
is a personal outlook. But I know whom I would back.

About the author:
George Slater

George Slater is an Options Trader and author of “Retire Rich using DIY Retirement Funds”. George lives in Perth, Western Australia with his family and trades the US and Australian Options Markets from home. George has experienced trading with Shares, CFDs, Warrants and Options. He trades both personally and within his DIY Retirement Fund. He follows the works of Gann and Elliot and is a member of two trading education groups.

George has appeared on several radio programs and writes a regular newsletter, Superwatch, about DIY Retirement Funds.

Tel +61 8 9291 7343
©George Slater

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