Beating the Taxman - strategies for traders to minimise tax

Once a person reaches an eligible age to take the super annuation funds can he or she still invest through super annuation and still be charged 15% Tax? And can you fully remove your money from the fund at anytime when you are at the appropriate age?

jemma said:

It is not illegal but you still must declare the income from foreign sources.

Also if you make 300K in offshore trading accounts, how do you get the money back in the country without raising alarm bells from the ATO???

They get a report via the banks every transaction in and out above 10 grand through Austrac.

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I'm using my imagination... Condoms!?... how about a taylored jacket using many hundred dollar bills as stuffing... "wow that jacket looks expensive, is it armani?"

Seriously now... Has anyone experimented with dual residency? Maybe there's a way... I'm Australian born, Naturalized Brazilian, And my dad's portuguese born so I can wattle over to the Portuguese embassy in Canberra and get myself a european passport...

How does the Company in Trust work??

Hi Insider,

I don't think that anyone who is doing this is going to make statements about it on the forum. If they did, I'd have doubts as to whether they're actually doing it or just talking as if they were.

I just wrote a whole bunch of stuff responding to various other posts but deleted it again. Whats the point? I'm not trying to be antagonistic, provokative maybe... it's good for people to ask HOW, instead of assuming NO. I legitimately save myself thousands in tax every year this way.

Midnight Oil said it best, "It's better to die on your feet than to live on your knees".

theasxgorilla said:

Hi Insider,

I don't think that anyone who is doing this is going to make statements about it on the forum. If they did, I'd have doubts as to whether they're actually doing it or just talking as if they were.

I just wrote a whole bunch of stuff responding to various other posts but deleted it again. Whats the point? I'm not trying to be antagonistic, provokative maybe... it's good for people to ask HOW, instead of assuming NO. I legitimately save myself thousands in tax every year this way.

Midnight Oil said it best, "It's better to die on your feet than to live on your knees".

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Nicely said... That is why I started the thread in the first place. I realised that there was two parts to the share market... First is making money and the second is keeping it... Whether people actually do these things or not and how they do them is completely up to them... It is always better to ask HOW than WHY. As in "how can I pay less tax?" rather than "why do I have to pay so much tax!?" (the answer to the second question is "because you didn't ask the first question")... I appreciate your help

I was just thinking, if you had an elderly person around, say your dad, with a Self Managed Super annuation fund... Could you trade stocks through them, get taxed 15% and then just get them to hand you the money over to ya in a big birthday card...

"----------------------------------------INVESTMENT STRUCTURES----------------------------------------

Trusts

A trust is an obligation on a person to hold assets for the benefit of others who are known as beneficiaries.
It is the beneficiary that is taxed rather than the trustee. The beneficiary has to include their share of the trust’s net income in their personal tax return. Trust structures do not allow for any capital loss in the separate geared structure. Unsuccessful gearing can result in a total loss of the original investment without any tax deductions.

It is common for trusts to make a company "presently entitled" to trust income without actually paying out the money. In this way, the trust can accrue income taxed at the 30 per cent corporate rate, which can be distributed via an asset revaluation to individuals who can avoid paying the 48.5 per cent marginal rate.

Only 50% of the capital gains on an asset held by a trust for more than 12 months is taxable. A discretionary trust allows the trustee to distribute profits and franking credits freely.

Trusts are also cheap to setup and are not regulated by ASIC, and running costs are minimal.

Advantages:

Taxation advantages – can split income between beneficiaries’
Asset protection
Limited liability

Disadvantages:

Possible implication for capital gains tax
Cannot distribute tax losses
Establishment and administration costs
All profits must be distributed, if not, 48.5% tax is payable


Company

A Company is a legal entity completely separate from its shareholders. The Australian Securities and Investments Commission regulate companies.
A Company pays income tax on its profits at the rate of 30%. A Company does not have to distribute profits unlike a trust. Where profits are withheld, this is a better option than an individual being taxed at 48.5%. The compound effect of investment capital makes a company structure attractive. A Company costs around $900 to set up and can be done in a matter of hours.


Advantages:

Tax rate 30%
Franking credits
Can distribute income among shareholders
Does not have to distribute profits
Separate legal entity

Disadvantages:

No asset protection
Can be sued
No discretion over distribution of profits
CGT index exempt
Goodwill CGT exempt


Company in Trust

This involves both structures, utilising advantages from each. Trust profits are distributed to the company, which then distributes the profits to shareholders. It is a way of providing asset protection while also paying a lower tax rate.

Whichever option you choose, you can nominate profits among family members. E.g. if you have two university student children not earning income, you can nominate them to receive a share of the income. This way you pay $0 tax on the first $6,000 for each person, then 15% up to $21,600, then 30% up to $63,000."

money tree said:

Where profits are withheld, this is a better option than an individual being taxed at 48.5%.

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This could be out of date...the current top tax rate is 46.5% and doesn't kick in until $150,000 per year.

I spoke to a fund manager today... and there is nothing illegal about setting up a company over seas with an offshore bank account and trading through the company... The only issue is bringing the money to Australian shores... They will ask questions... But you either bring the money in physically or discretely (as in small portions electronically) or you spend it all overseas... So basically where it gets iffy is where you try to bring it back...

As young individuals CGT or trading as a company is is the best way to minimise tax... If you're of age then a self managed super fund is the way to go...

insider said:

I spoke to a fund manager today... and there is nothing illegal about setting up a company over seas with an offshore bank account and trading through the company... The only issue is bringing the money to Australian shores... They will ask questions... But you either bring the money in physically or discretely (as in small portions electronically) or you spend it all overseas... So basically where it gets iffy is where you try to bring it back...

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Being that you're a naturalised Brazilian and can get a Portugese passport and since Portugal is part of the EU, which as we've seen from photos on another thread is a wonderful place for a holiday...doesn't this become interesting to learn??

Imagine you have an investment company which is incorporated in Europe somewhere that you set up with a partner, and as directors the company is required to fly you both over to annual general meetings at locations decided by an "in-house commitee"...this year, Croatia, next year Copenhagen etc.

What about research trips to places you might like to consider investing?

Illegal? Hardly. Creative? Absolutely.

theasxgorilla said:

Being that you're a naturalised Brazilian and can get a Portugese passport and since Portugal is part of the EU, which as we've seen from photos on another thread is a wonderful place for a holiday...doesn't this become interesting to learn??

Imagine you have an investment company which is incorporated in Europe somewhere that you set up with a partner, and as directors the company is required to fly you both over to annual general meetings at locations decided by an "in-house commitee"...this year, Croatia, next year Copenhagen etc.

What about research trips to places you might like to consider investing?

Illegal? Hardly. Creative? Absolutely.

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Definately mate... I think i'm gonna go on a "business trip" soon...

insider said:

As young individuals CGT or trading as a company is is the best way to minimise tax... If you're of age then a self managed super fund is the way to go...

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Can you please give a brief summary of the tax advantages of a SMSF?
cheers
carmo

drmb said:

Set up Self Managed Super Fund and pay 15% tax. See http://www.esuperfund.com.au/ for one of the cheapest if not the cheapest ways of doing this, from post in Shares and Super. I had my SMSF set up by Dixons so I haven't used esuperfund so do your own research please.

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This is all you need to know I think.

Thats an excellent link. I just read this:

"The $200,000 SMSF Myth"

Can anybody confirm or deny if it is in fact a myth that you need $200k to make it cost-effective to operate and SMSF?

i posted a question in this thread a while back https://www.aussiestockforums.com/forums/showthread.php?t=4787

does that qualify as beating the taxman?

kbryant said:

i posted a question in this thread a while back https://www.aussiestockforums.com/forums/showthread.php?t=4787

does that qualify as beating the taxman?

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I guess you could, but I don't know much... I read somewhere, becuase there is no agreement, if Australia ever did get suspicious and want to investigate there was no obligation to provide banking information... You'll have do some research on that

If I decided to take the "opening a company" route and get taxed at 30%, what could I claim as tax deductions, expenses and what not? For example can I lease a car? Can I buy computers in the name of the business? Can I claim the devaluing of the computers against tax? etc.

theasxgorilla said:

Thats an excellent link. I just read this:

"The $200,000 SMSF Myth"

Can anybody confirm or deny if it is in fact a myth that you need $200k to make it cost-effective to operate and SMSF?

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It is not a myth. Nor is it correct for everyone - but it is the generally accepted figure that is mentioned by all sorts of industry groups from the ATO, ASIC, Institute of Chartered Accountants, industry funds etc.

The key is the contributions. You can start off with much less IF you are in a position to make serious contributions quite quickly. The ATO is seriously concerned about Mr and Mrs Wage Earner (with mortgage up to the hilt) starting up their own SMSF with $40,000 start up.

If you are only making contributions of $5,000-$6,000 a year, it is not just going to keep pace with the fees (if the fund account has a small balance).
I have said it before and I think it is worth repeating.......it costs just as much to run a fund that has a Term Deposit of $1Million as it does to run a fund with $1 dollar. It is all about economies of scale.

The range between $150,000-$200,000 has traditionally been the point at which the fees of Industry Funds are more expensive than a SMSF. An industry fund may charge 2% of funds under management - super members in the past haven't seen this cream coming off the top.

But it is not just about cost. It is also about being able to manage and administer your own superannuation fund. PLenty of people say "I can do better"........but they don't. It is no coincidence that SMSF are being voluntarily being wound up at record levels at present.

As a side issue ........ASX Gorilla.....Glen Wheatley called and asked me to ask you if you would testify for him in his ATO tax evasion case. If you missed it, sneak a look at the front page of today's Australian. He will be very pleased to hear that it is everybodies right to minimise tax and that nothing is illegal.

Duckman

insider said:

If I decided to take the "opening a company" route and get taxed at 30%, what could I claim as tax deductions, expenses and what not? For example can I lease a car? Can I buy computers in the name of the business? Can I claim the devaluing of the computers against tax? etc.

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Could I also claim travel expenses?...

Duckman#72 said:

As a side issue ........ASX Gorilla.....Glen Wheatley called and asked me to ask you if you would testify for him in his ATO tax evasion case. If you missed it, sneak a look at the front page of today's Australian. He will be very pleased to hear that it is everybodies right to minimise tax and that nothing is illegal.

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It makes good news doesn't it? John Farnham's manager gets prosecuted for tax evasion. Care to elaborate some of the details of what was done?