Ever wondered about those secrets rich people use to pay less tax?

In this article James Wrigley, Associate Partner of Highview, discusses ‘structures’ and how the right structure can save you tax!

First and foremost, tax is pretty good stuff. This might seem like an odd thing for an accountant to say but hear me out. Tax funds our roads and infrastructure, emergency services, schools, healthcare and defence. On the flip side it also pays for politician’s wages for which I’m not sure the return on investment is that wonderful. But you have to take the good with the bad I suppose. 

Now to be clear, just in case the commissioner of the ATO is a fan of my articles, I’m talking about ‘legal’ methods of reducing tax. So, I don’t want to see anyone trying to claim deductible “business trips” to Switzerland or the Cayman Islands next year thanks! 

Recently I read an article interviewing four families who are all included in the top one percent of Australian income earners – the link to this article is here, if you’re interested.  Each of these families had some things in common. All ran businesses and they all utilised a team of trusted advisors, that being lawyers, financial planners and of course the most important of all, accountants (no bias here). The more interesting thing is that they did this long before being in the top one percent.   

One of the biggest tax saving tools at your disposal when running a genuine business is the variety of structures you can choose to trade in – e.g. partnership, a company, a trust or hybrid of those. There a pros and cons to all of these so the structure to choose depends on a variety of factors specific to your circumstances.

Depending on the structure you choose, some of the benefits can include a separation of your personal and business dealings, a method to more easily sell your business, asset protection and of course, tax minimisation. Now technically you can’t pick a structure solely because of the tax benefits but it’s often a nice by-product.   

As I stated, the right structure is very dependent on your personal situation. So, this leads me on to my next point, having the right team around you to guide and advise what’s best for your circumstances and goals.

As accountants we can help you to minimise tax and maximise your business. When It comes wealth creation and management, that being investments, insurance and super you need a financial planner. To ensure you’re on the right side of the law as well as protecting yourself adequately through wills, agreements and other legal documentation you’ll need a good lawyer.

At the end of the day, saving tax is just one of the many benefits wealthy people enjoy when using a trusted team. So, if you’re looking to emulate the strategies the wealthy use, or would like some help finding your dream team, give us a call!

Article written by James Wrigley, Associate Partner, Highview Accounting & Financial – Mornington.