The best ‘problem’ in the world is to have earned so much income that you must pay tax

There are many ways to make a dollar, but most people do not realise that not every dollar is equal under our tax system. There are massive incentives to earn non-personal exertion/personal services income; that is, to structure yourself as a business and earn business income. There are other types of income as well, such as royalty income and the like, that we should all know about.

So often we see people who have been structured into a company or not structured at all who are missing out on many legitimate tax breaks. One such situation is where income splitting could be effected but has not been. The tax savings over time are enormous, but so often we see spouses being paid salaries for work they do not undertake in the business at a level that would be hard to defend if challenged by the ATO.

Sadly, most often this situation is barely legal, or not legal at all; and worse, it is not as effective as a much more legitimate solution can offer.

The overriding point – get someone on the job who really knows the tax game. (If you had the choice of Steve Waugh or some local hack to bat for your life, who would you choose?) Itrust you would choose someone with a track record of really doing the business and not short change yourself by focusing on considerations such as cost and/or comfort with your incumbent advisor.

Questions

Ask yourself:

• What types of income exist?
• What types of income am I currently earning?

Ask accountant:

• Can you explain whether you believe there are any opportunities for changing the type of income I am generating to more tax effective outcomes?

This article was taken from the book 'Your Money, Your Choice', written by Brett Kelly. For more information on Brett, please visit his website: www.brettkelly.com.au