Have a look at this write up of the budget by a financial planning consultant. Now that all manner of restrictions have been lifted from the super system, the standard method for avoiding tax for those in their late forties and early fifties, will involve something like this. Borrow to live (if necessary – though it makes more sense to live off the rent on your investment houses and dividends while you allow interest used to fund the purchase of these assets to capitalise – this [arguably] keeps your interest bill tax deductible though you have to watch out for Hart’s case).
You salary sacrifice all the additional income you earn over some nasty tax threshold into super and then withdraw it on retirement. Once you retire you can even deposit your income into super to reduce tax and withdraw it from your super fund to ilve on.
I haven’t checked out the details – some troppodillians may be able to fill us in – but it sure is a mug’s game to pay more than 15% tax if you’ve got a fair bit of money and you’ve made it out of your thirties for a few years.
The 2006 Budget may go down in history as the one that created the financial planning profession. While many look to the 1983 introduction of lump sum taxes as the watershed event that was the genesis of the financial planning industry, historians will refer to this year’s budget as the tsunami that wiped away many of the indifferent practitioners and practices of the past.
The new super rules, as they are presently articulated, provide a host of opportunities for both retirees and their families that make the regulatory arbitrages now available simply pale into insignificance by comparison.
In the broadest terms, super is now the anointed wealth management vehicle for all those Australians prepared to suspend their cynicism [sic]. The pairing of super with the tax and social security assets and incomes test exemptions for the family home produces a coupling that dwarfs all other forms of investments for sheltered returns.
And now, with the ability to access equity in the family home through first and second generation home equity release offerings, income generation has never been easier.
And on it drools. Paul Keating said about growing old “there’s nothing good about it”. Well there is now.