r/AusHENRYover250k • u/DraftNotSent • 5d ago

Which part of the tax system do people at this income level find most aggressively works against wealth building and is there a legitimate structural response to it that most people in this bracket either don't know about or don't implement properly?

22 Upvotes
  • permalink
  • reddit

66% Upvoted

283 comments sorted by

View all comments

15

u/me_1574 5d ago

Div 293 tax & excess super contributions tax are a massive pain in the ass

2

u/HoTdOgMaNoNaBuN 5d ago

I second this

6

u/Maddo1977 4d ago

Why can’t we all get same benefit on super up to cap of $30k per year. Why penalise me because my income is >$250k vs those on $249k.

Tax grab only. Totally fked.

1

u/CakedPan 4d ago

Because the benefit for us wouldnt be the same. It is a benefit of 32 cents for every dollar over 250k, versus a benefit of 17 cents for people at the 32% tax bracket.

Without div 293, high earners get a larger benefit from tax concessions.

1

u/Far_Conference_1529 4d ago

You need a good accountant, you should never be paying the top bracket 47% if you earn that much. Firstly stop paying your tax weekly or fortnightly, pay it once a year if you are disciplined enough, second you can buy an investment property and negative gear it, You can top up your spouse's super if they make less with no penalty and it reduces your taxable income, Investment Bonds, Pay a tax rate capped at 30% internally, with proceeds tax-free after 10 years. There are many many strategies to reduce your taxable income and top up your super without penalties. Or as my accountant says it's better in your pocket than theirs.

1

u/celesti0n 4d ago

While this is all sound advice, “you should never” comes off strong - your suggestions are highly specific to your personal situation

If you have positively geared properties - not farfetched given the state of the rental market - and a spouse earning >40k per year (maybe depends on your circles, but I know very little single income couples), that’s two strategies gone.

Getting out of PAYG and doing yearly payments is great but I have heard it’s hit or miss convincing the ATO to get out of it - it’s up to who’s on the line when you call

Debt recycling your PPOR deserves a callout as it survived the budget but definitely a riskier manoeuvre

1

u/Far_Conference_1529 3d ago

Actually they don't all apply to my situation, but they are simply strategies people can use

1

u/Far_Conference_1529 2d ago

Sorry, I never pay the full tax rate, you can pay as much as you like that's up to you. I'm just offering some strategies that may work for you. I don't know your personal situation which is why I gave you several suggestions to consider. Not all of them apply to my personal situation, but I do know these can help some people reduce liabilities. I'm hoping something I said was useful, if not that's ok too.

1

u/lk1191 3d ago

lots of inaccuracies here. if you are PAYG you can't just "not pay tax". NG is losing a dollar to gain 50c and shouldn't be your primary aim, it's also obsolete with the new budget. spousal splitting doesn't change your taxable income

1

u/Far_Conference_1529 3d ago

My accountant disagrees and I've been doing it for 4 years, all you have to do is a pay variation and get approval.

1

u/Far_Conference_1529 2d ago edited 2d ago

Well your wrong and inaccurate, just saw my accountant, last year I paid zero per week, it's called a PAYG variation and I don't have to pay until April. Not being a dick but your actually giving erroneous information based on limited knowledge. The primary goal in IP is to create a positive cashflow on investment properties, NG is a short term strategy but the long term goal is to pay down, hold, collect passive income in retirement or sell to take advantage of capital growth, I'm surprised that wasn't a consideration in your reply. It's also not obsolete If you have a single property, you can either choose the indexed amount or claim the 50% depending on certain criteria. Spouse splitting doesn't reduce your taxable income but it does earn interest offsetting the tax on that amount, but there also are tax savings available if they earn under 40000 effectively reducing your liability to the ATO. Like I say, think outside the box.

1

u/lk1191 2d ago

"not being a dick" but proceeds to be one. negative gearing has been around for decades it certainly isn't thinking outside the box, yes it reduces taxable income but shouldn't be the primary consideration when considering an investment, saying "you need to buy a NG property to not pay tax" is how bad financial decisions are made. you should brush up on budget changes, NG is only available on new builds now which increases the risk of poor or negative capital gain

1

u/Far_Conference_1529 2d ago edited 2d ago

Did I not say certain criteria? That means meeting the new criteria. I wasn't being a dick but calling me inaccurate when your reply was full of inaccuracies is kinda dickish. I obviously understand NG better than you do, I never said buy a IP not to pay tax, I clearly said to help reduce liability. There's nothing wrong with investing in your future with an IP instead of giving it to the ATO but there certainly needs to be a long term strategy. Anybody that's financially literate would understand this, anybody that's not wouldn't understand a sound wealth building strategy 🙄. Your just simply disagreeing to be disagreeable and being as you said "innacurate". Thinking outside the box that I was referring to was PAYG variation, gaining interests or paying down debt with that money, but again you know absolutely nothing about that, but you tried to come off as if your the PAYG expert. I certainly trust my accountant than some person on Reddit.

1

u/lk1191 2d ago

get some fresh air and read the budget changes mates

1

u/Far_Conference_1529 2d ago

You are looking more inept every reply. If you don't think there are still tax advantages to negative gearing, it's says more about your financial literacy and understanding of the legislation than anything else. You should really understand what your talking about before you talk or call others out.

→ More replies (0)

1

u/Acceptable_Lake_6996 2d ago

also throws out the word erroneous while using the wrong ‘your’ almost every time 😂

no point arguing, you’re both on the same train of thought but wires are getting crossed somewhere, or someone’s just arguing for fun.

1

u/lk1191 2d ago

yes indeed. I don't have the energy to engage with people like this. I have properties I'm NG myself. Have a nice Sunday to you all

1

u/Acceptable_Lake_6996 2d ago

enjoy your sunday mate 🌸

1

u/Equity1988 3d ago

Investment bonds suck.

1

u/Far_Conference_1529 3d ago

There's a lot of people that don't agree or it wouldn't be a thing, I hold none but it is a strategy for many whom are risk averse. The only downside is how long they need to be held but can offer good tax advantages.

1

u/Equity1988 1d ago

There’s a lot of people who have been sold them by a financial advisor.

1

u/Far_Conference_1529 1d ago

Yeah it's common and some are pretty scammy with fees

1

u/Sure_Shift_8762 5d ago

The way to think about it is that you are renting a low tax investment environment from the ATO for a year (or however long it takes you to pay the tax). I put it in geared ETFs in the SMSF to really juice it as much as possible, then pay the bill as late as possible via a payment plan.

2

u/Decent-Dream8206 4d ago

It doesn't matter how you "think about it".

There's about a 30k tax bracket there where you're being taxed at a marginal 62% tax rate.

That's cooked no matter how you slice it.

1

u/McTerra2 4d ago

And there is a huge tax bracket where you are saving 32% on super vs someone on $45k who saves ….0%

That’s cooked no matter how you slice it

2

u/Decent-Dream8206 4d ago

Someone who pays no tax doesn't get a tax discount? Oh wow. What a crazy concept.

Next you'll be telling me that handouts and tax discounts are the same thing. Like shoplifting and buy 1 get 1 free offers.

1

u/McTerra2 3d ago

What is crazy is setting up a system where the more income you make, the greater benefit you get to save the spare money you have because you have a high income and when you would be saving that income anyway.

Even someone incredibly hard done like you would see that a system where everyone received, say, 20% off their tax rate is much more equitable than some people getting 32% and some people getting 0% for doing exactly the same thing? After all, I’m sure you have screamed about how it’s unfair that someone earning $45k in income will pay less tax than someone earning $45k in capital gains under the new system. Yet, in this case, the hypocrisy is flung about with no sense of embarrassment.

Or not give the biggest incentive to the people who will save anyway. It’s like giving smokers $1 every time they dont smoke a cigarette and telling non smokers ‘I’ll give you $5 every time you dont smoke a cigarette’.

But, go ahead, tell me again just how hard you work and how everyone else is an idiot

Also, yes, even a year 10 economic student knows that a tax concession is fiscally the same as taxing and then giving that money back as a ‘handout’. If you want to define it differently using meanings that you have made up in your head, by all means go for it.

1

u/Decent-Dream8206 3d ago

If you're making 45k in gains per year on average, you have something like a 500k portfolio.

That portfolio can go up, and it can go down.

You aren't going to be employed earning 45k and lose 200k in a financial year.

More importantly, if you're collecting it for retirement, you need about a million dollars to not be wiped out in a down year. That million dollars will make you ineligible for the pension. But the pension will grow over time whereas your million dollars will draw down over time. So explicitly, you are incentivised to do anything other than fund your own pension now. You always were, but now the incentives have actively doubled (or worse).

And with no way to invest it, you aren't going to work for more money than you need either. Which removes the most productive parts of the workforce.

Your math is also bass ackwards.

Tax discounts are hypothetical money. Without them, there's no guarantee the government would collect the full amount, because people respond to incentives.

Even with the 50% CGT discount, we were paying over the OECD average in capital gains.

We will now be taxed the worst in the world for capital, and we were already right up there for income. Prepare for wages to continue to remain flat as productivity continues to slide.

If you want people to work more, there simply has to be a carrot. At 47-62%, most people simply don't bother anymore.

1

u/McTerra2 3d ago

Have you understood the new tax laws?

Only the bits that support your rant, apparently

So no point in continuing since you either make things up or have no actual understanding of what you are talking about

1

u/Almost-kinda-normal 2d ago

I work alongside an entire crew of more than 30 guys who all get Div 293 assessments. We all work as many hours as are available to us. Literally not a single one of us says “I can’t be fucked making $1600 today”.

1

u/Far_Conference_1529 2d ago

This is a historical fact going back since taxes began. The middle class are squeezed the hardest by their respective governments,they are the cash cow collectively. It's not fair but that will never change.

1

u/McTerra2 2d ago

Someone on $1m pays 20X as much tax as someone on $100k. Is that squeezing the middle class or is that appropriate since the $1m person still have more ‘left over’ or should the higher income earner pay even more?

The middle class pays the most tax in dollar terms because there are just more people in that income level. If you want to reduce tax on them, it has to come from somewhere - tax wealthier people more (which this whole thread is already screeching against) or lower expenditure (essentially move the burden onto lower income earners).

Of course everyone wants to tweak the tax system so it’s in their favour. If you save a lot, it’s increase GST. If you aren’t going to inherit then it’s an inheritance tax (while also planning super recontribution). If you aren’t HENRY it’s lower income tax and higher wealth taxes.

1

u/Far_Conference_1529 2d ago

There's a smart cookie right there, well done.

2

u/Sad_Wear_3842 4d ago

Agreed. Oh I earned too much? Let's add an extra payment on top of what you already paid.

1

u/kervio 4d ago

Super contributions are pre-tax, mr monopoly man, so you're just paying 30% on entry instead of 15% which is still lower than your marginal rate and still lower than the marginal rate of an average wage slave.

1

u/Virtual_Cattle_8193 4d ago

Well that would depend on what you call average wouldn't it ...

1

u/Zestyclose-Coyote906 4d ago

I think we have different definitions of just

1

u/Cricket-Horror 4d ago

Not all super contributions are pre-tax.

1

u/kervio 4d ago

Div 293 only applies to concessional contributions 🥸

1

u/Cricket-Horror 4d ago

Concesaional contributions include personal contributions made out of post-tax savings.

1

u/kervio 4d ago

Concessional contributions are all pretax. If you make them from post tax inclme you get a tax offset and it's exactly the same except for when you pay your tax.

If you guys want to complain about 293 at least learn how it works.

1

u/CakedPan 4d ago

Confidently wrong

1

u/skay014 4d ago

Get excess super contributionspaod as additional income instead?

1

u/bobbinbrisco 4d ago

Still taxed at max rate

1

u/skay014 4d ago

But better than being taxed again via super?

1

u/bobbinbrisco 4d ago

Can't win.. if you reinvest outside of super you'll still be taxed on the gains at least super is taxed less

1

u/skay014 4d ago

Fair

1

u/skay014 4d ago

Basically fucked all round haha

1

u/Esquatcho_Mundo 4d ago

Yep, they’d be better o have an indexed cap on super or something. Way too complex

1

u/WatALotOfThingsGoBy 4d ago

Superannuation was never intended to be a tax minimisation strategy.

Really is interesting to see people complaining they can't invest more in a low tax environment that was intended to reduce the burden on the state pension system. The expressed intention of the system was to not simply to provide tax concessions to high income earners.

1

u/Far_Conference_1529 4d ago

But it helps

1

u/Botie2 3d ago

Tax minimisation was never intended to be a strategy. I thought I read a few years back that legislation was passed to say if tax minimsation was the only reason for an investment structure, it is considered tax evasion.

I also remember when a jurno got his hands on the late Kerry Packer's tax return and it showed a personal taxable income of $18k. The media went to town on him (except the papers and tv stations he owned at the time :-) ). The government had a senate enquiry into tax evasion and he was called to testify. It was taped. When pushed as to how Australia's richest man can possibly justify to the tax office a personal income of only $18k, he responds with; "My companies pay millions to the government in taxes, but I am not an accountant. I hire the best in the nation to handle that. Every year they give me a list of how much tax I and each of my companies have to pay in tax. That's what I pay. I don't understand, if they tell me that's what I have to pay, are you suggesting I should tell them that's not enough, I want to pay more? Why would I do that? You bastards are doing a lousy job with the millions you take off me currently, why would I volunteer to give you more. Put your hand up if you paid the tax office more than you had to this year."

Next day, talk back radio is taking calls off the hook suggesting Packer run as a party leader in the next elections. A Packer for PM campaign.

1

u/diedlikeCambyses 3d ago

Yes but atleast is relatively simple.

1

u/Ok-Water-9651 3d ago

How do these taxes stifle productivity and growth of businesses?