The following are illustrative, basic case studies for your perusal.

Employee investing in Shares
Gwen works is a highly paid engineering consultant with a growing portfolio of shares.

Gwen is finding that there is a portion of her shares which she is turning over frequently and making increasing profits from.  As the profits are being made frequently, she often does not have access to the benefits of the CGT discount.

Gwen might be interested in creating a new structure, with its own tax file number and identity, in which future profits may be controlled.

Depending upon her circumstances, the best structure will be different.  For example, if Gwen has no spouse or dependents, such profits might be taxed at a lower tax rate in a company.  If Gwen has a large family, a trust structure may be more beneficial.

If Gwen can reduce her overall tax from her portfolio, the compounding growth of her investment portfolio may be significantly increased.

Property Investor
Mark owns an investment property and wishes to add to this holding.

Mark’s has found a new property which he believes will provide long term capital growth.  The property is close to the city, water, transport and cultural amenities.

The property was built in the early 1990s and he may obtain non-cash tax deductions, for depreciation and building allowances.

Mark is able to buy the property, with 100% finance, with little impact on his net monthly cashflow.

This allows Mark to reduce his debt over time, or to utilise his excess cash to renovate the his properties to assist in their valuations for either sale or supporting finance for a further investment.

Mark is able to use the tax system to improve investment returns and cashflow and expand his investments on a progressive and consistent basis.

Pre-Retiree Superannuation
Noel is 60 years of age is enjoying work.  However, he is also looking forward to an active and fulfilling retirement and wants to build his assets, so that he can maximise his cashflow once he is retired and no longer in receipt of employment income.

Noel decides to reduce his existing tax exposure by diverting future employment income into his superannuation fund.

Noel has invested his superannuation funds wisely and enjoyed good investment returns.  Adding further to his accumulated balance will mean he has a growing superannuation ‘nest egg’ enjoying continued good returns in a low tax environment.

Once he has retired and commences a pension from his fund, the balance he has accumulated continues to generate market returns and this income may be completely free of any tax.

Travelling Executive
Vaughan is a hard working executive for a major company.

He often has to travel for work and wonders how this might affect his taxation return.

Mark keeps detailed records of his travel and his employer agrees to restructure his existing package to include a travel allowance.

A tax deduction is able to be offset against his income to reduce his overall tax outcome significantly.

Game Show Host
Brian is the host of a popular TV game show.

He is quite well paid and, depending on ratings success, may be eligible to bonuses.

Brian has been consistently building a property portfolio and is looking for strategies to reduce his tax.

Brian decides to divert his bonuses to his superannuation fund and start diversifying his portfolio into a long term share portfolio.

He wishes to use gearing as part of his new investments but is nervous about using a margin loan, because he has heard one of his friends lost a lot of money when he was unable to meet a margin call.

Brian was able to diversify his portfolio and reduce his tax by broadening his investment risk with protection of his capital.

Inheritance
Sarah recently lost her elderly grandmother and inherited more than $7 million.

Sarah had never had so much money before and was concerned about people taking advantage of her, or putting her into inappropriate investment products which she did not understand, or where she thought there might be greater commissions on the product than investment returns for her.

Sarah resolved to diversify the money not just into different investments, but different investment structures to suit the investments and her family.

Sarah was able to minimise her ongoing tax burden and keep her affairs relatively simple.

nb. Names and scenarios altered for the protection of privacy and illustrative purposes.  Legislative changes may alter the outcomes of these scenarios (for better or for worse).

Copyright Tax Services Australia 2007
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